Financial health and management practices: a multi-year cross country analysis of PLCs
| Date | 02 July 2018 |
| Published date | 02 July 2018 |
| DOI | https://doi.org/10.1108/JFC-01-2017-0002 |
| Pages | 646-657 |
| Author | Md Shamimul Hasan,Normah Omar,ABM Rashedul Hassan |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Financial health and management
practices: a multi-year cross
country analysis of PLCs
Md Shamimul Hasan
EXIM Bank Agricultural University, Chapainawabgonj, Bangladesh
Normah Omar
Accounting Research Institute, Universiti Teknologi MARA,
Shah Alam, Malaysia, and
ABM Rashedul Hassan
EXIM Bank Agricultural University, Chapainawabgonj, Bangladesh
Abstract
Purpose –The purpose of this studyis to examine the relationship between financialstrength or condition
and managerialpractices in preparing financial statements of publiclimited companies. The objectives of this
study are threefold –to measure the financial strength, to measure integrity index and to examine the
relationshipbetween management practices and financialstrength.
Design/methodology/approach –Financialratios, Altman’s Z-Score, integrity index, ranking approach
and chi-square test are used to achieve the objectives. A multi-year cross-country analysis is done by
considering sampleof seven Asian countries, namely, Malaysia, Singapore,Thailand, Indonesia, Hong Kong,
China and Japan.
Findings –The study catchesthe relationship between management practices andfinancial strength across
sample countries. Management practices is one of the responsible factors for this relationship. They use
discretionary power in preparing financial statements to control the trading results. The principles of
accounting do not support the alteration of financial data tolook the company better on paper. The cost of
financialstatement fraud is higher than other occupationalfraud.
Research limitations/implications –This study does not cover factors other than management
practices and furtherstudy could be conducted to look for the other reasons that mayalso responsible for the
deviations.
Practical implications –Conflict of interest between shareholdersand board of directors is not a new
phenomenon. Auditing system is introduced to minimize this conflict of interest, but they failed to uphold
their position in reality. Management also needs to prove their integrity in financial statements. Ethical
considerationis the highest priority.
Social implications –Stakeholders, especially regulators, professional bodies and academics, should
concentrate on the issue on ‘how to reduce the manipulation in financial statements’to create a safe
investmentsavenue for the nation.
Originality/value –This study provides empirical evidences regarding the influence of management
practices on financial statements and financial strength of listed companies across countries. The culture,
attitudes, beliefs, perceptions, etc., are different from country to country. The aim is to contribute
JEL classification –M41, N25, C43
The researchers gratefully acknowledge the financial support and generosity of Accounting Research
Institute (ARI) and the Ministry of Higher Education, Government of Malaysia without which the
present study could not have been completed.
JFC
25,3
646
Journalof Financial Crime
Vol.25 No. 3, 2018
pp. 646-657
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-01-2017-0002
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