Skip to main content
SpringerLink
Log in

The influence of the financial crisis on corporate voluntary disclosure: Some Malaysian evidence

  • Original Article
  • Published:
International Journal of Disclosure and Governance Aims and scope Submit manuscript

Abstract

This article examines voluntary disclosure in the annual reports of 85 Malaysian companies listed on Bursa Malaysia. In departure from prior studies, which mainly examined the impact of social or environmental accidents on corporate disclosure, we examined voluntary disclosures for two years, 2006 and 2009, in an attempt to determine whether the 2007/08 financial crisis had some impact on corporate voluntary disclosure (CVD). Drawing on proprietary costs theory, we argued that in times of financial crisis companies might not have afforded the costly process of additional voluntary disclosures due to the related preparation and competitive costs. Hence, companies would have provided less voluntary information after the financial crisis. On the other hand, the financial crisis might have forced companies to be involved in more social activities to legitimize their existence. It could be argued that the public was in greater need during the financial crisis, and hence their expectations from company contributions might have been higher. To reduce the possibility of ‘legitimacy gap’, companies may have increased their involvement in corporate social responsibility (CSR) Programs, which in turn led to increased corporate disclosure. Using a self-constructed disclosure checklist, the findings of the study indicate that the extent and quality of CVDs provided in the annual reports of sample companies increased significantly following the recent global financial crisis. The results also reveal that based on the category of information (that is, strategic, financial, CSR), CSR information was the most widely disclosed category following the financial crisis. These findings support the view that companies utilize their annual report voluntary disclosures as a means of influencing society's perception of their operations, and as a means of legitimizing their existence.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Among the companies that declared bankruptcy were very successful and legitimate businesses (Riaz, 2009).

  2. Claessens et al (2000) show that at the 20 per cent cutoff level, more than 60 per cent of Malaysian public listed companies were in family hands.

  3. Hossain et al (1994) reported a mean disclosure index of 15.8 per cent, whereas Haniffa and Cooke (2002) reported a mean disclosure index of 31.3 per cent.

  4. Bursa Malaysia provides information related to listed companies in Malaysia. It was formerly known as the Kuala Lumpur Stock Exchange.

  5. The Bursa Malaysia has a Knowledge Centre that keeps books and records; however, going there and borrowing would be time consuming and involves additional costs.

  6. Only one company was listed in the Mining sector. Consistent with Amran and Devi (2008), the present study combined the mining sector with the plantation sector.

  7. The list of sample companies is provided in the Appendix.

  8. The disclosure checklist is attached in the Appendix.

  9. A perfect normally distributed value for Skewness and Kurtosis is 0 (Pallant, 2007). However, a range of values between +1 and −1 is usually used for normality distribution.

  10. The alternative parametric tests, paired sample t-tests were also conducted. The results of paired sample t-tests also show that the difference in the extent of CVDs before and after the recent financial crisis is statistically significant at t(84)= 11.028, P=0.000 with 95 per cent confidence level (that is, alpha set at 5 per cent).

  11. The alternative parametric tests, paired sample t-tests were also conducted. The results of the parametric tests (paired samples t-test) also show that the difference in the quality of CVDs before and after the recent financial crisis is statistically significant at t(84)=6.502, P=0.000 with 95 per cent confidence level (that is, alpha set at 5 per cent).

References

  • Abd Majid, M.S. and Kassim, S.H. (2009) Impact of the 2007 US financial crisis on the emerging equity markets. International Journal of Emerging Markets 4 (4): 341–357.

    Article  Google Scholar 

  • Aerts, W. and Cormier, D. (2009) Media legitimacy and corporate environmental communication. Accounting, Organizations and Society 34 (1): 1–27.

    Article  Google Scholar 

  • Al-Tuwaijri, S., Christensen, T. and Huges, K. (2004) The relations among environmental disclosure, environmental performance, and economic performance: A simultaneous equations approach. Accounting, Organizations and Society 29 (5/6): 447–471.

    Article  Google Scholar 

  • Amran, A. and Devi, S.S. (2008) The impact of government and foreign affiliate influence on corporate social reporting: The case of Malaysia. Managerial Auditing Journal 23 (4): 386–404.

    Article  Google Scholar 

  • Amran, A. and Nabiha, A.K.S. (2009) Corporate social reporting in Malaysia: A case of mimicking the West or succumbing to local pressure. Social Responsibility Journal 5 (3): 358–375.

    Article  Google Scholar 

  • Belkaoui, A. and Karpik, P.G. (1989) Determinants of the corporate decision to disclose social information. Accounting, Auditing and Accountability Journal 2 (1): 36–51.

    Article  Google Scholar 

  • Berrone, P., Gelabert, L. and Fosfuri, A. (2009) The impact of symbolic and substantive actions of environmental legitimacy. Working Paper Business School, University of Navarra, pp. 1–30.

  • Blacconiere, W.G. and Patten, D.M. (1994) Environmental disclosures, regulatory costs, and changes in firm value. Journal of Accounting and Economics 18 (3): 357–377.

    Article  Google Scholar 

  • Black, K. (2004) Business Statistics for Contemporary Decision Making. USA: John Wiley & Sons.

    Google Scholar 

  • Boesso, G. and Kumar, K. (2007) Drivers of corporate voluntary disclosure: A framework and empirical evidence from Italy and the United States. Accounting, Auditing and Accountability Journal 20 (2): 269–296.

    Article  Google Scholar 

  • Bondt, W.D. (2010) The crisis of 2008 and financial reform. Qualitative Research in Financial Markets 2 (3): 137–156.

    Article  Google Scholar 

  • Brigham, F.E. and Houston, J.F. (2010) Essentials of Financial Management. Singapore: Cengage Learning Asia Pte Ltd.

    Google Scholar 

  • Brown, I., Steen, A. and Foreman, J. (2009) Risk management in corporate governance: A review and proposal. Corporate Governance: An International Review 17 (5): 546–558.

    Article  Google Scholar 

  • Chau, G.K. and Gray, S.J. (2002) Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore. The International Journal of Accounting 37 (2): 247–265.

    Article  Google Scholar 

  • Che Haat, M.H., Abdul Rahman, R. and Mahenthiran, S. (2008) Corporate governance, transparency and performance of Malaysian companies. Managerial Auditing Journal 23 (8): 744–778.

    Article  Google Scholar 

  • Claessens, S., Djankov, S. and Lang, L.H.P. (2000) The separation of ownership and control in East Asian corporations. Journal of Financial Economics 58 (1/2): 81–112.

    Article  Google Scholar 

  • Clinch, G. and Verrecchia, R.E. (1997) Competitive disadvantage and discretionary disclosure in industries. Australian Journal of Management 22 (2): 125–137.

    Article  Google Scholar 

  • Cooke, T.E. (1989) Disclosure in the corporate annual reports of Swedish Companies. Accounting and Business Research 19 (74): 113–124.

    Article  Google Scholar 

  • Cooke, T.E. (1991) An assessment of voluntary disclosure in the annual reports of Japanese corporations. The International Journal of Accounting 26 (3): 174–189.

    Google Scholar 

  • Cormier, D. and Magnan, M. (2003) Environmental reporting management: A continental European perspective. Journal of Accounting and Public Policy 22 (1): 43–62.

    Article  Google Scholar 

  • Darrough, M.N. and Stoughton, N.M. (1990) Financial disclosure policy in an entry game. Journal of Accounting and Economics 12 (1/3): 219–243.

    Article  Google Scholar 

  • Day, R. and Woodward, T. (2009) CSR reporting and UK financial services sector. Journal of Applied Accounting Research 10 (3): 159–175.

    Article  Google Scholar 

  • Deegan, C. (2002) Australian Financial Accounting. Sydney: McGraw Hill.

    Google Scholar 

  • Deegan, C. and Rankin, M. (1997) The materiality of environmental information to users of accounting reports. Accounting, Auditing and Accountability Journal 10 (4): 562–583.

    Article  Google Scholar 

  • Deegan, C., Rankin, M. and Voght, P. (2000) Firms’ disclosure reactions to major social incidents: Australian evidence. Accounting Forum 24 (1): 101–130.

    Article  Google Scholar 

  • Depoers, F. (2000) A cost-benefit study of voluntary disclosure: Some empirical evidence from French listed companies. The European Accounting Review 9 (2): 245–263.

    Article  Google Scholar 

  • Elijido-Ten, E . (2009) Can stakeholder theory add to our understanding of Malaysian environmental reporting attitudes? Malaysian Accounting Review 8 (2): 85–110.

    Google Scholar 

  • Eng, L.L. and Mak, Y.T. (2003) Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy 22 (4): 325–345.

    Article  Google Scholar 

  • Goldin, I. and Vogel, T. (2010) Global governance and systemic risk in the 21st Century: Lessons from the financial crisis. Global Policy 1 (1): 4–15.

    Article  Google Scholar 

  • Gray, R., Kouhy, R. and Lavers, S. (1995a) Corporate social and environmental reporting: A review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing and Accountability Journal 8 (2): 47–77.

    Article  Google Scholar 

  • Gray, S.J., Meek, G.K. and Roberts, C.B. (1995b) International capital market pressures and voluntary annual report disclosures by US and UK multinationals. Journal of International Financial Management and Accounting 6 (1): 43–68.

    Article  Google Scholar 

  • Gul, F.A. and Leung, S. (2004) Board leadership, outside directors’ expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy 23: 351–379.

    Article  Google Scholar 

  • Guthrie, J. and Parker, L.D. (1989) Corporate social reporting: A rebuttal of legitimacy theory. Accounting and Business Research 19 (76): 343–352.

    Article  Google Scholar 

  • Guthrie, J. and Parker, L.D. (1990) Corporate social disclosure practice: A comparative inter-national analysis. Advances in Public Interest Accounting 3: 159–175.

    Google Scholar 

  • Hackston, D. and Milne, M.J. (1996) Some determinants of social and environmental disclosures in New Zealand companies. Accounting, Auditing and Accountability Journal 9 (1): 77–108.

    Article  Google Scholar 

  • Haniffa, R.M. and Cooke, T.E. (2002) Culture, corporate governance, and disclosure in Malaysian corporations. ABACUS 38 (3): 317–349.

    Article  Google Scholar 

  • Haniffa, R.M. and Cooke, T.E. (2005) The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy 24 (5): 391–430.

    Article  Google Scholar 

  • Hearit, K.M. (1995) Mistakes were made: Organizations, apologia, and crises of social legitimacy. Communication Studies 46 (1–2): 1–17.

    Article  Google Scholar 

  • Ho, S.S.M . and Wong, K.S. (2001) A study of corporate disclosure practice and effectiveness in Hong Kong. Journal of International Financial Management and Accounting 12 (1): 75–102.

    Article  Google Scholar 

  • Hoque, Z. (2006) Methodological issues in Accounting Research: Theories and Methods. London: Spiramus.

    Google Scholar 

  • Hossain, M., Tan, L.M. and Adams, M. (1994) Voluntary disclosure in an emerging capital market: Some empirical evidence from companies listed on the Kuala Lumpur Stock Exchange. The International Journal of Accounting 29 (4): 334–351.

    Google Scholar 

  • Hybels, R.C. (1995) On legitimacy, legitimation, and organizations: A critical review and integrative theoretical model. Academy of Management Journal (Special Issue Best Papers Proceedings): 241–245.

  • Lindblom, C. (1994) The implications of organizational legitimacy for corporate social performance and disclosure. Paper presented at Critical Perspectives on Accounting Conference, New York.

  • Magness, V. (2006) Strategic posture, financial performance and environmental disclosure: An empirical test of legitimacy theory. Accounting, Auditing and Accountability Journal 19 (4): 540–563.

    Article  Google Scholar 

  • Mishkin, F.S. (1999) Lessons from the Asian crisis. Journal of International Money and Finance 18 (4): 709–723.

    Article  Google Scholar 

  • Mitton, T. (2002) A cross-firm analysis of the impact of corporate governance on the East Asian Financial Crisis. Journal of Financial Economics 64 (2): 215–241.

    Article  Google Scholar 

  • Mohd Ghazali, N.A. (2007) Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance: The International Journal of Business in Society 7 (3): 251–265.

    Article  Google Scholar 

  • Mohd Ghazali, N.A. (2010) Corporate governance and voluntary disclosure in Malaysia. International Journal of Business Governance and Ethics 5 (4): 261–279.

    Article  Google Scholar 

  • Mohd Ghazali, N.A. and Weetman, P. (2006) Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis. Journal of International Accounting, Auditing and Taxation 15 (2): 226–248.

    Article  Google Scholar 

  • Newson, M. and Deegan, C. (2002) Global expectations and their association with corporate social disclosure practices in Australia, Singapore, and South Korea. The International Journal of Accounting 37 (2): 183–213.

    Article  Google Scholar 

  • Nik Ahmad, N.N. and Sulaiman, M. (2004) Environmental disclosures in Malaysian annual reports: A legitimacy theory perspective. The International Journal of Commerce and Management 14 (1): 44–58.

    Article  Google Scholar 

  • Nik Ahmad, N.N., Sulaiman, M. and Siswantoro, D. (2003) Corporate social responsibility disclosure in Malaysia: An analysis of annual reports of KLSE listed companies. IIUM Journal of Economics and Management 11 (1): 1–37.

    Google Scholar 

  • O'Donovan, G. (2002) Environmental disclosures in the annual report: Extending the applicability and predictive power of legitimacy theory. Accounting, Auditing and Accountability Journal 15 (3): 344–371.

    Article  Google Scholar 

  • Oliver, C. (1991) Strategic responses to institutional processes. Academy of Management Review 16 (1): 145–179.

    Article  Google Scholar 

  • Pallant, J. (2007) SPSS Survival Manual: A Step by Step Guide to Data Analysis Using SPSS for windows. Berkshire, UK: McGraw-Hill.

    Google Scholar 

  • Patten, D.M. (1992) Intra-industry environmental disclosures in response to the Alaskan Oil Spill: A note on legitimacy theory. Accounting, Organisations and Society 17 (5): 471–475.

    Article  Google Scholar 

  • Patten, D.M. (1995) Variability in social disclosure: A legitimacy-based analysis. Advances in Public Interest Accounting 6: 273–285.

    Google Scholar 

  • Patten, D.M. (2002) The relation between environmental performance and environmental disclosure: A research note. Accounting, Organisations and Society 27 (8): 763–773.

    Article  Google Scholar 

  • Patten, D.M. and Nance, J.R. (1998) Regulatory cost effects in a good news environment: The intra-industry reaction to the Alaskan Oil Spill. Journal of Accounting and Public Policy 17 (4/5): 409–429.

    Article  Google Scholar 

  • Prencipe, A. (2004) Proprietary costs and determinants of voluntary segment disclosure: Evidence from Italian listed companies. The European Accounting Review 13 (2): 319–340.

    Article  Google Scholar 

  • Raffournier, B. (1995) The determinants of voluntary financial disclosure by Swiss listed companies. The European Accounting Review 4 (2): 261–280.

    Article  Google Scholar 

  • Rahman, M.Z. (1998) The role of accounting in the East Asian financial crisis: Lessons learned? Transnational Corporations 7 (3): 1–52.

    Google Scholar 

  • Riaz, S. (2009) The global financial crisis: An institutional theory analysis. Critical Perspectives on International Business 5 (1/2): 26–35.

    Article  Google Scholar 

  • Said, R., Zainuddin, Y.H. and Haron, H. (2009) The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal 5 (2): 212–226.

    Article  Google Scholar 

  • Smith, J.V.L ., Adhikari, A. and Tondkar, R.H. (2005) Exploring differences in social disclosures internationally: A stakeholder perspective. Journal of Accounting and Public Policy 24 (2): 123–151.

    Article  Google Scholar 

  • Souto, B.F. (2009) Crisis and corporate social responsibility: Threat or opportunity? International Journal of Economic Sciences and Applied Research 2 (1): 36–50.

    Google Scholar 

  • Suchman, M.C. (1995) Managing legitimacy: Strategic and institutional approaches. Academy of Management Journal 20 (3): 571–610.

    Google Scholar 

  • Sutantoputra, A.W . (2009) Social disclosure rating system for assessing firms’ CSR reports. Corporate Communications: An International Journal 14 (1): 34–48.

    Article  Google Scholar 

  • Teoh, H.Y. and Thong, G. (1984) Another look at corporate social responsibility and reporting: An empirical study in a developing country. Accounting, Organizations and Society 9 (2): 189–206.

    Article  Google Scholar 

  • Terreberry, S. (1968) The evolution of organizational environments. Administrative Science Quarterly 12 (4): 590–613.

    Article  Google Scholar 

  • Thompson, P. and Zakaria, Z. (2004) Corporate social responsibility reporting in Malaysia: Progress and prospects. Journal of Corporate Citizenship 13 (Spring): 125–136.

    Article  Google Scholar 

  • Tilling, M. and Tilt, C. (2010) The edge of legitimacy voluntary social and environmental reporting in Rothmans’ 1956–1999 Annual Reports. Accounting, Auditing and Accountability Journal 23 (1): 55–81.

    Article  Google Scholar 

  • Tilt, C.A. (1994) The influence of external pressure groups on corporate social disclosure: Some empirical evidence. Accounting, Auditing and Accountability Journal 7 (4): 47–72.

    Article  Google Scholar 

  • Verrecchia, R.E. (1983) Discretionary disclosure. Journal of Accounting and Economics 5 (1): 179–194.

    Article  Google Scholar 

  • Villiers, C.D. and Staden, C.J.V. (2006) Can less environmental disclosure have a legitimising effect? Evidence from Africa. Accounting, Organizations and Society 31 (8): 763–781.

    Article  Google Scholar 

  • Wagenhofer, A. (1990) Voluntary disclosure with a strategic opponent. Journal of Accounting and Economics 12 (4): 341–363.

    Article  Google Scholar 

  • Wiseman, J. (1982) An evaluation of environmental disclosures made in corporate Annual Reports. Accounting, Organisations and Society 7 (1): 53–63.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Accounting, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia, Jalan Gombak, Kuala Lumpur, 53100, Malaysia

    Nazli Anum Mohd Ghazali

Authors
  1. Abdifatah Ahmed Haji
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Nazli Anum Mohd Ghazali
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

1holds an MSc in Accounting from the International Islamic University Malaysia. His research interests are in the areas of corporate disclosure and governance.

Appendix

Appendix

Table A1

Table A1 Companies included in the sample
Full size table

Table A2

Table A2 The voluntary disclosure checklist
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Haji, A., Mohd Ghazali, N. The influence of the financial crisis on corporate voluntary disclosure: Some Malaysian evidence. Int J Discl Gov 9, 101–125 (2012). https://doi.org/10.1057/jdg.2011.27

Download citation

  • Received:

  • Revised:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/jdg.2011.27

Keywords

Search

Navigation