Using a sample of 185 companies in 2007, this paper investigates whether the mapping of earnings quality into intrinsic value for Malaysian companies differs as a function of ownership concentration type. It is hypothesized that compared with widely-held companies, the positive relation between earnings quality and intrinsic value is stronger (weaker) for companies dominated by the family of the Chief Executive Officer (Government-dominated companies). Intrinsic value was calculated from stock ratings produced by a firm of Malaysian investment consultants. Three measures of earnings quality are used: two approaches from the journal literature and sub-ratings for earnings and dividend stability produced by the firm of consultants. The results support the second hypothesis (Government-related investors) but not the first hypothesis (family-dominated companies). There is reasonable support for the theoretical predictions about the two earnings quality metrics from the journal literature. However, the consultant’s sub-ratings appear to provide a more accurate measure of earnings quality of Malaysian companies.
Previously published in the Proceedings of Global Accounting, Finance and Economics Conference (2012), http://www.wbiconpro.com/Melbopurne_accounting2012.htm