Antecedence of Accounting Value

Suresh Ramachandra, Auckland University of Technology

Abstract: Accounting values of firms are determined by strategies that the companies pursue, which in turn are influenced by their board characteristics. This research studies the impact of directors’ reputation on accounting values, using the Partial Least SquaresPath Model (PLS-PM), based on a sample of 75 manufacturing companies listed on the Malaysian Stock Exchange over 15 years (1125 firm-year observations). Accounting values are calculated by the summation of book values of tangible and intangible assets reported in financial statements, together with estimates of homegrown intangibles using Lev and Radhakrishnan’s (2005) model. The socially stratified honorific titles in Malaysia provide a unique opportunity to quantify the reputations of directors. The results confirm that directors’ reputation impacts accounting values both endogenously and exogenously. The study also finds that the effect of directors’ reputation is more pronounced when home-grown intangibles have a positive value.

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