Does Information Overload of Annual Reports Matter?

Tze San Ong,Boon Heng Teh,Kai Cing Seng,Sin Huei Ng

doi:10.5430/ijfr.v11n2p243

Tze San Ong, Boon Heng Teh + Show 2 more

Open Access

https://doi.org/10.5430/ijfr.v11n2p243

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Abstract

Nowadays, information overload is an increasing concern and has become an alarming issue. Bursa Malaysia requires all PLCs to have corporate disclosures in their annual reports in order to cultivate good corporate governance. However, annual report readability issues are evident and poor annual report readability is a common occurrence in Malaysia. Thus, this paper seeks to empirically investigate the association between information overload issues, annual readability and financial performance of Malaysian PLCs. Secondary data consisting of 85 PLCs from the years 2015 to 2017 were used. The results have revealed that the information overload issues, i.e. too many disclosures for each company, negatively affect the companies’ financial performance. Firms with annual reports that are easier to read with ideal readability have better financial performance. Not only that, fewer information overload issues tend to be encountered when the annual reports have good readability levels. Future studies are suggested to include primary data as well as non-listed companies for comprehensive coverage and generalization. Policy makers are encouraged to create minimum disclosure requirements which address the information gap between informed and uniformed investors. In addition, with developments in technology, advanced smartphone applications can be developed for investors to conveniently access the financial information of companies.

Highlights

The Malaysian Accounting Standards Board (MASB) implements the Malaysian Private Entities Reporting Standards (MPERS) for private entities
This study aims to determine the impact of annual report readability on the financial performance of Malaysian Public Listed Companies
With a controlled company size, annual report readability has a significant relationship with financial performance, either in a positive or negative way

Summary

Introduction

The Malaysian Accounting Standards Board (MASB) implements the Malaysian Private Entities Reporting Standards (MPERS) for private entities. For companies other than private entities, the Malaysian Financial Reporting Standards (MFRS) are implemented. MFRS is mostly applicable to publicly listed companies in Malaysia (MIA, 2012). Entities use effective accounting standards at the date of reporting as the basis for the preparation of financial statements. They are required to logically select appropriate accounting policies, with a full understanding of their implications on the financial statements. As early application is permitted, management can apply new accounting standards that have yet to be made effective

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