Nik Mohamad Zaki Nik Salleh¹
Mohd Hassan Che Haat^2
1Faculty of Management, Multimedia University,
Selangor, Malaysia
²Faculty of Management and Economics
Universiti Malaysia Terengganu,
Terengganu, Malaysia

The purpose of this study is to examine the relationship between audit committee diversity and earnings management in Malaysia after the revision of the Malaysian Code of Corporate Governance (MCCG) in 2007. The sample for this study is drawn from 280 companies listed on Bursa Malaysia in 2005, 2006, 2008 and 2009. Multivariate regression analysis is used to address the research hypotheses. The discretionary accrual is estimated using the Modified Jones Model which is used to proxy for earnings management. The study finds negative correlation between the compositions of Malay audit committee members with earnings management. In contrast, female directors show no effect in mitigating earnings management which may be due to the small size of female members in the audit committee.

This study provides to the researchers new empirical results on the effectiveness of audit committee diversity in mitigating earnings management after the amendments of MCCG. This study is important because it is among the pioneer empirical evidences to compare the effectiveness of audit committee diversity in mitigating earnings management between the pre and post revised MCCG periods. The audit committee diversity refers to ethnic diversity and gender diversity.

Keywords: audit committee, gender diversity, ethnics diversity, earnings management