CEO leadership, internal audit practices and real earnings management: Malaysian evidence

This study examines the influence of CEO leadership characteristics and internal audit practices on real earnings management (REM) among Malaysian public listed companies (PLCs). Grounded in Agency Theory, the research explores whether demographic and structural governance mechanisms effectively mitigate managerial opportunism and enhance financial reporting quality. Using panel data regression, the study analyses 3,028 firm-year observations from 618 Main Market firms listed on Bursa Malaysia between 2020 and 2024. The findings indicate that CEO age and Malay CEO are significantly and negatively associated with REM, suggesting that older and Malay CEOs are less likely to engage in earnings manipulation, potentially, due to greater risk aversion or culturally driven ethical considerations. Outsourced internal audit functions also show a significant negative relationship with REM, highlighting that internal control oversight is more effective when it is performed by an external independent party. Conversely, female CEO presence and internal audit investment are not statistically significant. The study provides practical implications for regulators and corporate boards seeking to strengthen governance frameworks and promote financial transparency in Malaysia