Corporate Governance and Compliance of Integrated Reporting: Evidence from Malaysian Listed Companies

Authors

  • Saiful Bakhtiar Masduki Department of Commerce, Politeknik Muadzam Shah, Muadzam Shah, Pahang
  • Mohamad Hafizul Mohd Zaid Department of Commerce, Politeknik Muadzam Shah, Muadzam Shah, Pahang

DOI:

https://doi.org/10.24191/ji.v14i2.232

Keywords:

Integrated reporting; Sustainability reporting; Listed companies, Corporate governance

Abstract

Integrated reporting is an emerging practice progressively catching the consideration of organizations.The idea of sustainability reporting increased more significance in the companies’ annual report, a patternthat is implanted likewise in integrated reporting. The governance structure all the more precisely the boardof director is the main role to decide whether the company will issue an integrated report. Hence, thepurpose of this paper is to examine the relationship between corporate governance (managerial ownership,family ownership, institutional ownership and government ownership) and consistence of coordinatedintegrated reporting elements disclosure. To achieve this objective, we analysed the way in whichintegrated reports of 30 companies are following the guidance provided by the International IntegratedReporting Framework (IIRF). As a result, we noticed that most annual report scored the highest compliancelevel and consistence with the guidance of the IIRF. In addition, the result also demonstrated institutionalownership and government ownership positively affect and significance integrated reporting elementsdisclosure. Our findings contribute to comprehend the practice of integrated reporting and may havesuggestions for regulators in emerging countries for company sustainability reporting. Keywords: Integrated reporting; Sustainability reporting; Listed companies, Corporate governance

References

Abdur Rouf. (2011). Corporate characteristics, governance attributes and the extent of voluntary disclosure in Bangladesh. African Journal of Business Management. https://doi.org/10.5897/ajbm10.1180
Adams, S., & Simnett, R. (2011). Integrated Reporting: An Opportunity for Australia’s Not-for-Profit Sector. Australian Accounting Review. https://doi.org/10.1111/j.1835-2561.2011.00143.x
Al-Akra, M., & Hutchinson, P. (2013). Family firm disclosure and accounting regulation reform in the Middle East: The case of Jordan. Research in Accounting Regulation. https://doi.org/10.1016/j.racreg.2012.11.003
Abeysekera, I., & Guthrie, J. (2004). Human capital reporting in a developing nation. British Accounting Review. https://doi.org/10.1016/j.bar.2004.03.004
Anderson, R.H. & M.J. Epstein (1996). The Usefulness of Corporate Annual Reports to Shareholders in Australia, New Zealand, and the United States: An International Comparison, Studies in Managerial and Financial Accounting, Vol. 4.
Ahmad, A., Saleh, N. M., Iskandar, T. M., & Alias, M. A. (2011). Peranan pengawasan pelabur institusi dan kekaburan perolehan. Jurnal Pengurusan.
Barako, D. G., Hancock, P., & Izan, H. Y. (2006). Factors influencing voluntary corporate disclosure by Kenyan companies. Corporate Governance: An International Review. https://doi.org/10.1111/j.1467-8683.2006.00491.x
Brennan, N. (2001). Reporting intellectual capital in annual reports: Evidence from Ireland. Accounting, Auditing & Accountability Journal. https://doi.org/10.1108/09513570110403443
Bozzolan, S., Favotto, F., & Ricceri, F. (2003). Italian annual intellectual capital disclosure: An empirical analysis. Journal of Intellectual Capital. https://doi.org/10.1108/14691930310504554
Chau, G., & Gray, S. J. (2010). Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2010.07.002
Chen, C. (2013). Discussion of “Government ownership, corporate governance and tax aggressiveness: Evidence from China.” Accounting and Finance. https://doi.org/10.1111/acfi.12054
Chen, C. J. P., & Jaggi, B. (2000). Association between independent non-executive directors, family control and financial disclosures in Hong Kong. Journal of Accounting and Public Policy. https://doi.org/10.1016/S0278-4254(00)00015-6
Cheng, E. C. M., & Courtenay, S. M. (2006). Board composition, regulatory regime and voluntary disclosure. International Journal of Accounting. https://doi.org/10.1016/j.intacc.2006.07.001
Cheng, M., Green, W., Conradie, P., Konishi, N., & Romi, A. (2014). The International Integrated Reporting Framework: Key Issues and Future Research Opportunities. Journal of International Financial Management and Accounting. https://doi.org/10.1111/jifm.12015
Chau, G., & Gray, S. J. (2010). Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2010.07.002
Claessens, S., Djankov, S., & Lang, L. H. P. (2000). The separation of ownership and control in East Asian Corporations. Journal of Financial Economics.
Campbell, D. J. (2000). Legitimacy Theory or Managerial Reality Construction? Corporate Social Disclosure in Marks and Spencer Plc Corporate Reports, 1969-1997. Accounting Forum. https://doi.org/10.1111/1467-6303.00030 Core, J. E. (2001). A review of the empirical disclosure literature: discussion. Journal of Accounting and Economics, 31(1-3), 441-456.
D’Souza, J., Ramesh, K., & Shen, M. (2010). Disclosure of GAAP line items in earnings announcements. Review of Accounting Studies. https://doi.org/10.1007/s11142-009-9100-0
Elizabeth, C., & Baines, S. (1998). Does gender affect business ‘performance’? A study of microbusinesses in business services in the UK. Entrepreneurship and Regional Development. https://doi.org/10.1080/08985629800000007
Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy. https://doi.org/10.1016/S0278-4254(03)00037-1
Eccles, R. G., Saltzman, D., Muniandy, B., Ali, M. J., Today, A., Team, E., … Dêclaration, L. (2011). Achieving Sustainability Through Integrated Reporting. Stanford Social Innovation Review. https://doi.org/10.1016/j.sbspro.2013.08.672
Ernst & Young (2012), “Ernst & Young’s excellence in integrated reporting awards 2012”, available at: www.ey.com/Publication/vwLUAssets/Excellence_in_Integrated_ Reporting_Awards_2012/$FILE/120830%20Excellence.indd.pdf (accessed 2 April 2011).
Fan, J. P. H., & Wong, T. J. (2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics. https://doi.org/10.1016/S0165-4101 (02)00047-2
Francis, J., Schipper, K., & Vincent, L. (2005). Earnings and dividend informativeness when cash flow rights are separated from voting rights. Journal of Accounting and Economics. https://doi.org/10.1016/j.jacceco.2005.01.001
Fuad Rahman, A., & Mohd‐Saleh, N. (2008). The Effect of Free Cash Flow Agency Problem on the Value Relevance of Earnings and Book Value. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/19852510880000636
Gonenc, H., & Aybar, C. B. (2006). Financial crisis and firm performance: Empirical evidence from Turkey. Corporate Governance: An International Review. https://doi.org/10.1111/j.1467-8683.2006.00508.x
Gul, F. A., & Leung, S. (2004). Board leadership, outside directors’ expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy. https://doi.org/10.1016/j.jaccpubpol.2004.07.001
Gul, F. A. (2006). Auditors’ response to political connections and cronyism in Malaysia. Journal of Accounting Research. https://doi.org/10.1111/j.1475-679X.2006.00220.x
Guthrie, J., Petty, R., & Ricceri, F. (2006). The voluntary reporting of intellectual capital: Comparing evidence from Hong Kong and Australia. Journal of Intellectual Capital. https://doi.org/10.1108/14691930610661890
Gerpott, T. J., Thomas, S. E., & Hoffmann, A. P. (2008). Intangible asset disclosure in the telecommunications industry. Journal of Intellectual Capital. https://doi.org/10.1108/14691930810845795
Ghani, E., & Said, J. (2010). Digital Reporting Practices among Malaysian Local Authorities. Journal of E-Government.
Ghazali, N. A. M. (2007). Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance. https://doi.org/10.1108/14720700710756535
Ho, S. S. M., & Shun Wong, K. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/S1061-9518(01)00041-6
Hossain, M., Perera, M. H. B., & Rahman, A. R. (1995). Voluntary Disclosure in the Annual Reports of New Zealand Companies. Journal of International Financial Management & Accounting. https://doi.org/10.1111/j.1467-646X.1995.tb00050.x
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy. https://doi.org/10.1016/j.jaccpubpol.2005.06.001
Iatridis, G. E. (2013). Environmental disclosure quality: Evidence on environmental performance, corporate governance and value relevance. Emerging Markets Review. https://doi.org/10.1016/j.ememar.2012.11.003
Khadaroo, M. I. (2005). Business reporting on the internet in Malaysia and Singapore: A comparative study. Corporate Communications. https://doi.org/10.1108/13563280510578204
IIRC. (2013). Business model: Background Paper for <IR>. Iirc. https://doi.org/10.1098/rstb.2007.2199
Jensen, M. C., W. H. M. (1976). Theory of the Firm : Managerial Behavior, Agency Costs and Ownership Structure Theory of the Firm : Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics. https://doi.org/http://dx.doi.org/10.1016/0304-405X (76)90026-X
Johnson, S., & Mitton, T. (2003). Cronyism and capital controls: Evidence from Malaysia. Journal of Financial Economics. https://doi.org/10.1016/S0304-405X(02)00255-6
Kochhar, R., & David, P. (1996). Institutional Investors and Firm Innovation: A Test of Competing Hypotheses. Strategic Management Journal. https://doi.org/10.1002/(sici)1097-0266(199601)17:1<73::aid-smj795>3.3.co;2-e
Kim, K. A., Kitsabunnarat, P., & Nofsinger, J. R. (2004). Ownership and operating performance in an emerging market: Evidence from Thai IPO firms. Journal of Corporate Finance. https://doi.org/10.1016/S0929-1199(02)00019-6 Keliwon, K., & Aziz, K. A. (2005, January). Web financial reporting in Malaysia. The current stage. In Proceedings of International Conference on E-Commerce. 59-65.
Lim, S., Matolcsy, Z., & Chow, D. (2007). The association between board composition and different types of voluntary disclosure. European Accounting Review. https://doi.org/10.1080/09638180701507155
Lin, X., & Zhang, Y. (2009). Bank ownership reform and bank performance in China. Journal of Banking and Finance. https://doi.org/10.1016/j.jbankfin.2006.11.022
Majumdar, S. K. (1997). The impact of size and age on firm-level performance: Some evidence from India. Review of Industrial Organization. https://doi.org/10.1023/A:1007766324749
Manes-Rossi, F., Tiron-Tudor, A., Nicolò, G., & Zanellato, G. (2018). Ensuring more sustainable reporting in europe using non-financial disclosure-de facto and de jure evidence. Sustainability (Switzerland). https://doi.org/10.3390/su10041162
Montecalvo, M., Farneti, F., & de Villiers, C. (2018). The potential of integrated reporting to enhance sustainability reporting in the public sector. Public Money and Management. https://doi.org/10.1080/09540962.2018.1477675
Magarey, R. C., Bull, J. I., & Tomasin, W. A. (2008). Yield losses caused by leaf diseases: 1999 and 2003 selection trial analyses. 2008 ASSCT Conference - 30th Annual Conference Australian Society of Sugar Cane Technologists.
Mohd Ghazali, N. A., & Weetman, P. (2006). Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2006.08.001
Mohd-Saleh, N, Mohd Iskandar, T. & Rahmat, M.M. (2005). Earnings management and board characteristics: Evidence from Malaysia. Jurnal Pengurusan 24: 77-103.
Munir,S. Mohd-Saleh, N. and Yatim, P. (2013). Related party transaction, family ownership and earnings quality: A study of Malaysian firms. Asian Academy of Management Journal of Accounting and Finance 9(1): 129-153.
Mohd-Saleh, N., & Omar, N. (2014). CEO duality, family-control and goodwill impairment. Asian Journal of Business and Accounting.
Mangena, M., & Pike, R. (2005). The effect of audit committee shareholding, financial expertise and size on interim financial disclosures. Accounting and Business Research. https://doi.org/10.1080/00014788.2005.9729998
Peterson, C. A., & Philpot, J. (2007). Women’s roles on U.S. Fortune 500 boards: Director expertise and committee memberships. Journal of Business Ethics. https://doi.org/10.1007/s10551-006-9164-8
Patelli, L., & Prencipe, A. (2007). The relationship between voluntary disclosure and independent directors in the presence of a dominant shareholder. European Accounting Review. https://doi.org/10.1080/09638180701265820
PwC (2014), “Value creation: the journey continues”, A survey of JSE Top-40 companies’ integrated reports, available at: www.pwc.co.za/en_ZA/za/assets/pdf/integratedreporting-survey-2014.pdf (accessed 10 May 2014).
Qi, D., Wu, W., & Zhang, H. (2000). Shareholding structure and corporate performance of partially privatized firms: Evidence from listed Chinese companies. Pacific Basin Finance Journal. Rouf, M., & Al-Harun, A. (2011). Ownership structure and voluntary disclosure in annual reports of Bangladesh. Pakistan Journal of Commerce and Social Sciences (PJCSS), 5(1), 129-139.
Rouf, D. (2012). The Financial Performance and Corporate Governance Disclosure: A Study in the Annual Reports of Listed Companies of Bangladesh. In Journal of Commerce and Social Science.
Rouf, A. (2015). Corporate characteristics, governance attributes and the extent of voluntary disclosure in Bangladesh. African Journal of Business Management, 5(19), 7836-7845.
Rose, C. (2007). Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review. https://doi.org/10.1111/j.1467-8683.2007.00570.x
Salter, S. B. (1998). Corporate financial disclosure in emerging markets: Does economic development matter? International Journal of Accounting.
Singh, V., Vinnicombe, S., & Johnson, P. (2001). Women directors on top UK boards. Corporate Governance. https://doi.org/10.1111/1467-8683.00248
Saleh, M., Zulkifli, N., & Muhamad, R. (2010). Corporate social responsibility disclosure and its relation on institutional ownership: Evidence from public listed companies in Malaysia. Managerial Auditing Journal. https://doi.org/10.1108/02686901011054881
Sapienza, P. (2004). The effects of government ownership on bank lending. Journal of Financial Economics. https://doi.org/10.1016/j.jfineco.2002.10.002
Tower, G., Hancock, P., & Taplin, R. H. (1999). A Regional Study of Listed Companies’ Compliance with International Accounting Standards. Accounting Forum. https://doi.org/10.1111/1467-6303.00016
Tian, Y., & Chen, J. (2009). Concept of Voluntary Information Disclosure and a Review of Relevant Studies. International Journal of Economics and Finance. https://doi.org/10.5539/ijef.v1n2p55
Walt, N., & Ingley, C. (2003). Board Dynamics and the Influence of Professional Background, Gender and Ethnic Diversity of Directors. Corporate Governance. https://doi.org/10.1111/1467-8683.00320
Wang, K., O, S., & Claiborne, M. C. (2008). Determinants and consequences of voluntary disclosure in an emerging market: Evidence from China. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2008.01.001
Wei, M., Vogel, D. L., Ku, T. Y., & Zakalik, R. A. (2005). Adult attachment, affect regulation, negative mood, and interpersonal problems: The mediating roles of emotional reactivity and emotional cutoff. Journal of Counseling Psychology. https://doi.org/10.1037/0022-0167.52.1.14 Zhou, M. M., & Panbunyuen, P. (2008). The association between board composition and different types of voluntary disclosure: A quantitative study of Chinese and Swedish listed companies. Handelshögskolan vid Umeå universitet.

Downloads

Published

2019-11-29