Articlehybrid2009

Disclosure Quality on Governance Issues in Annual Reports of Malaysian PLCs

Rusnah Muhamad · Suhaily Shahimi · Yazkhiruni Yahya · Nurmazilah Mahzan

23 citations0/0 files storedInternational Business Research

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

This paper investigates the disclosure quality of governance issues in annual reports of Malaysian PLCs. In recent years, the issue of corporate governance (CG) has received more attention than it would ordinarily have as a result of a series of corporate failures. Corporate collapses like Enron Corporation (US), Barings Empire (UK) and in Malaysia cases such as Perwaja and Pan Electric Inc. are all rooted in the lack of a proper governance system. As a result, the Finance Committee on Corporate Governance was established in 1998 to undertake a review of the legal and regulatory infrastructure, specifically to evaluate its effectiveness in promoting sound CG standards in Malaysia. Following this development, a few guidelines on CG have been released, particularly addressing the principles and best practices such as the Malaysian Code of Corporate Governance (the Code), the Capital Market Master Plan, and the Financial Sector Master Plan. The main purpose of these guidelines is to strengthen CG standards and practices in Malaysia by focusing on the role and responsibilities of various CG participants, mainly the management, board of directors, audit committee (AC), external and internal auditors. Secondary data is used in this study. A disclosure index is established following the Bursa Malaysia Governance Model, the Code’s guidelines and Committee of Sponsoring Organizations of the Treadway Commission (COSO) guidelines. This study also aims to examine factors that possibly affect both the quality and quantity of disclosure. In general, it may be concluded that Malaysian companies have complied with the standards requirements. Only three factors under observation namely leverage, size and type of industry were found to have relationship with the quality of disclosure relates to governance issues.

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References

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