The influence of corporate governance structure on sustainability reporting in Malaysia

Abstract

Purpose Following the introduction of the revised Malaysian Code on Corporate Governance in 2012 (MCCG 2012), this study aims to investigate the influence of corporate governance structure on the quality of sustainability reporting from the perspectives of agency theory and resource dependence theory. Design/methodology/approach Based on an analysis of 126 firms’ annual reports for the year ended 2010 and 2014, this study analyses sustainability reporting quality before the introduction of MCCG, 2012 (year ended 2010) and after (year ended 2014). Findings The findings of the study show that there was a significant increase in the quality of sustainability reporting from 2010 to 2014. Results from multiple regression analyses indicate that the number of sustainability-related training attended by the board of directors and the percentage of directors with sustainability-related experience have a significant impact on the quality of sustainability reporting. Practical implications Observations from the study provide useful insights into the importance of the appointment of directors with sustainability-related experience as part of the criteria for directors’ appointment. Moreover, the board of directors is encouraged to attend sustainability-related training to help firms improve sustainability practices and reporting. Social implications The increase in the quality of sustainability reporting indicates that companies are committed in ensuring that environmental degradation is put at the minimum level if not eliminated. It appears that companies are embracing the concept of sustainability reporting, and hence, contributing to improving and enhancing social well-being. Originality/value This study contributes to the discussion of both internal mechanisms (board independence and board capital) and external mechanisms (compliance to the code on corporate governance) of corporate governance structure on the quality of sustainability reporting. The findings can be used to identify necessary mechanisms that should be enhanced to strengthen the practice of sustainability reporting.

A Systematic Review on Corporate Philanthropy Disclosure by Malaysian Companies

“…In the case of the present study, in terms of the year of publication, four articles were published in 2020 (Jamil et al, 2020;Abdullah et al, 2020;Janang et al, 2020;Md Zaini et al, 2020); four articles were published in 2019 (Chang et al, 2019;San Ong et al, 2019;Alazzani et al, 2019;and Ismail & Latiff, 2019); seven articles were published in 2018 (Mohamed Adnan et al, 2018;Yusoff et al, 2018;Hamzah & Abdullah, 2018;Abd Rahman & Ku Ismail, 2018;Ismail et al, 2018;Said et al, 2018;Talpur et al, 2018); and two articles were published in 2017 (Sadou et al, 2017;Wahab et al, 2017).…”

“…More specifically, it should be noted that a total number of eight studies included ownership structure as the factor that affects voluntary disclosure, environmental disclosure and CSR disclosure (Zaini et al, 2020;Chang et al, 2019;Ong et al, 2019;Alazzani et al, 2019;Mohamed Adnan et al, 2018;Ismail et al, 2018;Said et al, 2018;Sadou et al, 2017). The board of directors' characteristics were examined by nine studies (Jamil et al, 2020;Janang et al, 2020;San Ong et al, 2019;Alazzani et al, 2019;Ismail & Latiff, 2019;Mohamed Adnan et al, 2018;Abd Rahman & Ku Ismail, 2018;Said et al, 2018;Sadou et al, 2017). Financial performance was examined by five studies (Abdullah et al, 2020;Yusoff et al, 2018;Sadou et al, 2017;Wahab et al, 2017).…”

“…Legitimacy theory had been used the most in eight studies (Abdullah et al, 2020;Janang et al, 2020;Md Zaini et al, 2020;Chang et al, 2019;San Ong et al, 2019;Yusoff et al, 2018;Ismail et al, 2018;Sadou et al, 2017). Agency theory was used by six studies (Jamil et al, 2020;Chang et al, 2019;San Ong et al, 2019;Said et al, 2018;Talpur et al, 2018;Sadou et al, 2017). Stakeholder theory is used by five studies (Ismail & Latiff, 2019;Yusoff et al, 2018;Hamzah & Abdullah, 2018;Ismail et al, 2018;Wahab et al, 2017).…”

“…Stakeholder theory is used by five studies (Ismail & Latiff, 2019;Yusoff et al, 2018;Hamzah & Abdullah, 2018;Ismail et al, 2018;Wahab et al, 2017). Next, Resource Dependence theory was used by two studies (Jamil et al, 2020;Talpur et al, 2018); and Institutional theory was being used by two studies (Chang et al, 2019;Mohamed Adnan et al, 2018). Lastly, the least theory being used were Attribution theory (Abdullah et al, 2020), Accountability theory (Abdullah et al, 2020), Upper echelons theory (Alazzani et al, 2019), Resource-Based View (RBV) theory (Ismail & Latiff, 2019), Transformational Leadership theory (Abd Rahman & Ku Ismail, 2018), Cultural theory (Abd Rahman & Ku Ismail, 2018), and Political economy theory (Ismail et al, 2018) where only one article examined each of the theories.…”

Sustainability reporting: An overview of the recent development

“…For this reason, in many European countries, a sustainability report is mandatory for many companies. Meanwhile, in Asia, studies on sustainability reports are mostly carried out in developed countries such as China (Dong et al, 2020;Li et al, 2013), Malaysia (Jamil et al, 2020), Thailand (Petcharat & Zaman, 2019), while in other Asian countries, SR research is still very few such as Pakistan (Bae et al, 2018), India (Aggarwal & Singh, 2019), and Indonesia (Amidjaya & Widagdo, 2019;Meutia et al, 2018). Bae et al (2018) state that there are few studies on sustainability reporting in Asian countries.…”