Social Disclosure and Its Accountability within the Malaysian

SOCIAL DISCLOSURE AND ITS ACCOUNTABILITY
WITHIN THE MALAYSIAN ENVIRONMENTALLY
SENSITIVE INDUSTRY

TABLE OF CONTENTS
CHAPTER – 1 INTRODUCTION..................................................................................... 1
1.1 Background of the study................................................................................... 1
1.2 Research aim and objectives............................................................................. 2
1.3 Research hypothesis......................................................................................... 2
1.4 Rationale of the study....................................................................................... 2
1.5 Potential contribution of the study....................................................................3
1.6 Chapter outline.................................................................................................. 3
CHAPTER -2 LITERATURE REVIEW...............................................................................5
2.1 Introduction....................................................................................................... 5
2.2 Corporate Social Reporting and its need...........................................................5
2.3 Type of information disclosed in corporate social reports.................................6
2.3.1 Quantitative disclosure...............................................................................6
2.3.2 Qualitative disclosure.................................................................................. 7
2.3.3 Monetary disclosure.................................................................................... 8
2.4 Influence of company characteristics on corporate social disclosure................8
2.4.1 Size............................................................................................................. 8
2.4.2 Profitability and financial leverage..............................................................9
2.4.3 Country of ownership................................................................................ 10
2.4.5 Number of independent board of directors...............................................10
2.5 Theoretical foundations of corporate social disclosure....................................11
2.5.1 Social contract.......................................................................................... 11
2.5.2 Accountability theory................................................................................ 12
2.5.3 Legitimacy theory.................................................................................... 13
2.5.4 Stakeholder theory....................................................................................14
2.5.5 Political economy theory...........................................................................15
CHAPTER – 3 RESEARCH METHODOLOGY.................................................................16
5.1 Introduction..................................................................................................... 16
5.2 Research hypothesis....................................................................................... 16
5.3 Research paradigm......................................................................................... 17
5.3.1 Positivism..................................................................................................... 17
5.3.2 Interpretivism............................................................................................... 17

5.3.3 Realism........................................................................................................ 18
5.4 Research approach.......................................................................................... 18
5.4.1 Deductive..................................................................................................... 18
5.4.2 Inductive...................................................................................................... 18
5.5 Research design.............................................................................................. 19
5.6 Data collection................................................................................................ 19
5.6.1 Primary data source..................................................................................... 19
5.6.2 Secondary data source.................................................................................20
5.7 Sample selection and size...............................................................................20
5.7.1 Target population......................................................................................... 20
5.7.2 Sampling methods....................................................................................... 21
5.7.2.1 Random sampling..................................................................................... 21
5.7.2.2 Non-random sampling...............................................................................21
5.7.3 Sampling element........................................................................................ 21
5.8 Data analysis and evaluation..........................................................................22
5.9 Reliability & validity........................................................................................ 22
5.10 Ethical concerns............................................................................................ 22
CHAPTER- 4 DATA ANALYSIS AND DISCUSSION........................................................23
6.1 Introduction..................................................................................................... 23
6.2 Descriptive data.............................................................................................. 23
6.2.1 Country of ownership................................................................................ 23
6.2.2 Type of Industries...................................................................................... 24
6.3 General Social Disclosure................................................................................ 25
6.3.1 Frequency & percentage of presenting corporate social disclosure by
ownership........................................................................................................... 25
6.3.2 Frequency & percentage of presenting corporate social disclosure by
industry.............................................................................................................. 25
6.4 Themes of disclosure....................................................................................... 26
6.4.1 Amount of disclosure by industry..............................................................26
6.4.2 Amount of disclosure of total word count by sector..................................27
6.4.3 Frequency of disclosure in social reports by separate heading according to
country............................................................................................................... 28
6.4.4 Amount of disclosure by country of ownership.........................................28
6.4.5 Amount of disclosure by sector.................................................................29

Regression: Impact of company characteristics on disclosure practices...............31
Regression: Impact of profitability on social disclosure in 2016............................31
Correlation between company characteristics and social disclosure.....................31
CHAPTER – 5 CONCLUSION....................................................................................... 33
REFERENCES............................................................................................................ 35
APPENDIX................................................................................................................. 39
Appendix 1 Impact of company characteristics on disclosure practices................39
Appendix: 2. Impact of profitability (ROE, ROA and EPS on social disclosure in
2016)..................................................................................................................... 39

CHAPTER – 1 INTRODUCTION
1.1 Background of the study
In the early 1990s, increased attention towards detrimental impact of corporate functions
on environment introduced public environmental reporting, as per which, all the establishments
need to communicate their initiatives and efforts so as to ensure environmental safety for the
community (Saleh, Zulkifli and Muhamad, 2010). In current era, growing number of companies
undertook various environmental efforts along with their economic activities for environmental
stewardship. In Malaysia, raising concerns our environment make it essential for the companies
to report and communicate the impact of their business functions on the environment in their
annual reports. In order to recognize firm for raising corporate transparency and their
environmental initiatives, Department of Environment also introduced Malaysia Environment
and Social Reporting Awards (MESRA). In the country, rapid technological advancement had a
greater influence over society and raise public concerns for safe and healthy living (Manaf, Atan
and Mohamed, 2006). Adverse impact on environment such as heavy rain, flooding, tsunami,
soil erosion, excessive pollution, biodiversity loss, emission of harmful gases, habitat loss and
others gain attention of the corporations towards such issues (NazliNik Ahmad and Sulaiman,
2004). Media also plays a major role in it as they continuously highlighted such increasing
concerns in publications and bring attention to the need of governmental intervention for
enforcing new laws. As a result, Malaysian Environmental Protection Agency, Consumer
Association of Penang and SahabatAlam Malaysia pressurize domestic firms to comply with the
environmental security and safety requirement and maintain ecological integrity. Companies
were also charged with the penalties for any offences which negatively affected environment
(Haniffa and Cooke, 2002).
Although, at present, many large companies of Malaysia disclose environmental and
social reporting in their annual reports, still, the country is still at infancy level because there is
no legal enforcement that mandates for the firms to produce such report. Although government
took many initiatives to encourage companies to publish environmental reports such as Financial
Reporting Standard (FRS) 101 and MASRA, still, there is no legislation has been developed
yet(Sarumpaet, 2006). Therefore, companies just emphasize more towards maximizing their net
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profitability without fulfilling their environmental responsibilities. It is because;they are unaware
about the financial benefits which they can get through such initiatives. Therefore, the current
research study mainly aims at examining the social disclosure practices among 100 public listed
companies from the Malaysian environmental sensitive sectors i.e. construction, plantation,
properties, consumer product and industrial product. It will also investigate that whether CSD is
related to the company profitability, financial leverage and ownership or not. Besides this, the
paper will also examine the type of information whether qualitative, quantitative or monetary are
incorporated in corporate social disclosure through applying content analysis.
1.2 Research aim and objectives
Aim: To examine social disclosure practices and its accountability within Malaysian
environmental sensitive industries
Objectives:
 To undertake extensive literature review on different theories of corporate social
disclosure practices
 To examine relationship between Corporate Social Disclosure (CSD) and company size
 To investigate whether CSD helps firms to maximize their profitability and financial
performance or not
 To find out relationship between firm’s environmental and social disclosure and country
of ownership
1.3 Research hypothesis
Are the company characteristics (company size, profitability, financial leverage, number of
independent directors and country of ownership) will affect the level of disclosure?
1.4 Rationale of the study
There are limited researches conducted, one is by Teoh and Thong1984 based on 100
Malaysian public listed companies which reported that large companies with foreign ownership
public corporate social reporting. Another study of Andrew and et.al.,1989 found that only 26%
firms disclose social reporting with main emphasizes on their human resources. Both the studies
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now become outdated. Recently, in 2016, a study has been conducted by Sarumpaet (2006) on
Malaysian public-listed organizations but researcher just studied relationship between CSG and
EPS for both the high and less-environmental sensitive companies. However,the current study
will be new, because it focuses only on Malaysianenvironmental sensitive industries which
operations resultant significant environmental hazards like construction, plantation, industrial
product, consumer product and properties and investigate its relationship with company’s
profitability as well as financial leverage.
1.5 Potential contribution of the study
The study will be of great significance for the Malaysian companies to identify that
whether by undertaking social and environmentally-responsible activities, they will be able to
maximize their performance and financial status or not. Thus, by this way, it would aware firms
about the need of environmental and social disclosure practices in their annual report.
Academicians and scholars can also get assistance of the study so as to develop an idea about the
impact of CSD on business performance.Governmental authorities and regulatory bodies can
also use it to identify that whether there is a need for designing a new legislative framework on
Environmental and Social Disclosure for companies or not.
1.6 Chapter outline
Chapter 1: Introduction: The beginning section brings attention of the reader towards
current social disclosure practices adopted by Malaysian firms along with the reporting
requirements. Thereafter, the study presents the research aims, objectives and hypothesis that
have been studied by scholar. Finally, it outlines rationale and the potential significance of the
industries.
Chapter 2: Literature review: This chapter of the thesis looks at how Malaysian political,
social and economic development currently affects company’s social reporting practices. The
section undertakes review of various scholarly articles on different CSD theories like legitimacy
theory, stakeholder theory, accountability theory and political economy theory.
Chapter:3: Research methodology:This section presents methodological constituents
covering research paradigm, approach, design, sample selection, size and method along with the
research instrument. Finally, it presents how study gave attention to the ethical concerns.
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Chapter: 4: Research findings and analysis:It interprets all the collected information
about Malaysian companies to investigate their reporting practices and its impact on their
performance. It will test all the designed research hypothesis applying suitable statistical tools in
the SPSS such as correlation, regression and others.
Chapter: 5: Conclusion and recommendation: Finally, study will bring attention to the
key findings of the research undertaken along with the necessary recommendation for the further
detailed investigation in future period.
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