Determinants of Strategic Information Disclosure - Malaysian Evidence

Abstract

ABSTRACTThis study is focusing on the voluntary corporate strategic information disclosure and the use of internet as a disclosure channel. The study objectives are to observe the Malaysian companies' practices towards the online disclosure of strategic information and determine the factors that might influence the volume of such information disclosure. The potential factors are derived from the corporate governance mechanisms which include the frequency of board meetings, board size, proportion of independent non-executive directors, CEO duality and institutional shareholdings. The sample used consists of companies listed on the Bursa Malaysia. A disclosure index is constructed to measure the volume of strategic information disclosed online and multiple linear regressions procedure is used to analyze the relationships between the variables. Results indicate that companies, on average, reveal moderate amount of strategic information. The main items disclosed are corporate vision and philosophy, strategic planning and business competition. The study also finds that only board size has a positive significant impact on the volume of strategic information disclosed. This indicates that top level management such as the board has a significant role in controlling and monitoring the disclosure practices of voluntary information.Keywords: Strategic Information; Online Disclosure; Corporate Governance; Malaysia; Family Business.1. INTRODUCTIONThe rapid technological expansion would have an impact on corporate governance particularly in the practices of corporate information disclosure (Al Arussi et al., 2009). Internet technology will enable business corporations to disclose their corporate information efficiently to the public including the international users as the information can be disclosed and disseminated instantly through internet. According to Wagenhofer (2003), the level of internet application in the business operations and capital markets is increasing. Thus, this situation offers opportunities to the analysts and researchers to study its impact on the operation of the company. Some authors believed that the internet is a great tool for the corporations to communicate information to stakeholders at a lower cost. Besides, the online information can be accessed from anywhere and at any time in which this is the main advantage of internet (Debreceny, Gray and Rahman, 2003; Al Arussi et al., 2009). The online information can also be easily shared with others and updateable (Joshi and Al-Modhahki, 2003; Kelton and Pennington, 2012). Interestingly, Andrikopoulos et al (2013) posit that the performance of the shipping players could be sustained by enhanced disclosure of financial information through the internet.Based on Akhtaruddin and Haron (2010), the issues of corporate governance and disclosure practices in the emerging markets and developed countries have increasingly grasped the interest of researchers, regulators, policy makers, investors and other stakeholders due to its significant in affecting the growth and development of corporations and capital market. It was proposed that the high volume of corporate disclosures will increase the equity performance (Mitton, 2002; Jiao, 2011). In addition, the equity market will react positively and becomes more effective if information disclosure was performed appropriately by the business corporations (Gul and Leung, 2004). Likewise, appropriate information disclosure might increase corporate transparency, improve investor confidence (Samaha et al, 2012), reduce the information asymmetries problem between different type of shareholders (Allegrini and Greco, 2013), between the managers and outsiders and contribute to a higher corporate value (Zhou and Lobo, 2001; Bozcuk, Aslan and Arzova, 2011; Uyar and Kilic, 2012; Al-Akra and Ali, 2012).Thus, it is interesting to study the practice of the voluntary information disclosure of the company by focusing the type of information disclosed, specifically strategic information and corporate governance structure of company that possibly influence the information disclosure. …

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