Value Relevance of Financial Information in Malaysian Listed Firms: Real Earnings Management’s Perspective

Abstract

Purpose: This study investigates the value relevance of financial information i.e., earnings (EPS), the book value of equity (BVE), and cash flow from operations (CFO). The study further investigates the influence of real EPS management (REM) on the value relevance of financial information because firms are now switching toward real earnings management rather than accrual-based earnings management (ABEM). Methodology: A sample of 250 public listed companies was used to test the hypotheses over the period 2014-2018. Using Driscoll-Kraay regression. Findings: This study finds that earnings, the book value of equity, and cash flow from operations are value relevant, and real earnings management moderates the value relevance of EPS, book value of equity, and cash flow from operations. Implications: This study has specific policy implications for regulators to push auditors to detect real earnings management to improve the value relevance of financial information.

Keywords

• Value Relevance of Financial Information
• Earnings
• Book Value of Equity
• Cash Flow from Operations
• Real Earnings Management