Abstract:

paThis study examines the degree of real earnings management practices of Government Linked Companies (GLCs) listed on Bursa Malaysia. More specifically, we analyze how government ownership affect the level of real earnings management of Malaysian listed firms. Using a sample of 329 firm-year observations from 2001 to 2014, this study finds that government ownership has significantly negative association with all proxies of real earnings management; abnormal cash flow from operations, abnormal production costs and abnormal discretionary expenses. The findings support alignment hypothesis that argues government ownership as a monitoring mechanism in limiting unethical corporate behaviour including real earnings management practices.