Ethnicity-based director network and earnings quality

Effiezal Aswadi Abdul Wahab, Janice C Y How and Peter Verhoeven

Asia-Pacific Journal of Accounting & Economics, 2025, vol. 32, issue 2, 251-277

Abstract: We exploit the ethnic value differences in Malaysia to investigate the role of ethnicity-based director network in earnings management. Using various centrality measures from social network analysis, we map the ethnicity-based network of 4,416 directors for a sample of 734 listed firms. Our results show central directors are associated with more aggressive earnings management, suggesting that the reciprocal relationships created by the network allow central directors to learn about earnings management techniques and/or to gain better resources to facilitate earnings management techniques. Whilst firms with more central directors in either the Bumiputera or non-Bumiputera network show a greater propensity to engage in earnings management, those in the non-Bumiputera network exhibit more aggressive earnings management practices.

Date: 2025
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DOI: 10.1080/16081625.2023.2298946

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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