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Abstract
This study analyses the impact of corporate governance mechanisms and firm characteristics on financial ratio disclosure over the turbulent 2001 and 2006 periods in Malaysia. It was found that the highest categories of ratio disclosures are profitability, cash flow and share market measures whereas there is far less information reported for capital structure and liquidity ratios. Importantly, none of the corporate governance mechanisms investigated influenced the level of financial ratio communication.
The findings in this study have important implications for Malaysian policy-makers and regulators that concerted efforts in strengthening overall corporate governance system and firms' disclosure policy are encouraged if the listed firms are to better communicate to their stakeholders. The results also provide useful insights about corporate transparency.
Keywords
Communication
Financial Ratios
Corporate Governance
Malaysia
(ProQuest: ... denotes formulae omitted.)
Introduction
Over the past twenty years, most East Asian economies including Malaysia have been actively reviewing and improving their corporate governance frameworks as well as moving to converge their country-specific standards with International Financial Reporting Standards (IFRS). IFRS convergence arguably enhances the uniformity in reporting but it may not succeed in producing high quality financial statements in practice (Ball, 2006). Transparency issues remain important ongoing issues as a catalyst for various nations' governance and regulatory reforms. The pivotal concern is the quality of corporate disclosure that satisfies stakeholders' information needs.
One of the objectives of the corporate governance reforms is to enhance the accountability and quality of financial reporting. This aim is relevant to overall mandatory and voluntary disclosure initiatives, including the unique aspect of financial ratios disclosures. Ratio analysis is a widely used tool of financial analysis. The use of financial ratios to interpret financial statement provides valuable indication of company's performance and financial position. Financial ratios are important to firm's stakeholders particularly, in times of corporate collapses or times of uncertainty. Yet, the extent of financial ratio disclosure varies widely across firms due to its voluntary nature.
A stream of empirical studies has examined overall voluntary disclosure. However, there has been little research relating financial ratio disclosures to corporate governance attributes. This study evaluates the influence of corporate governance systems on the extent of financial ratio communication by listed firms in Malaysia. 2001 and 2006 data are gathered from...