The Effect of Firm Internal and External Characteristics on Risk Reporting Practices among Malaysian Listed Firms

Mazurina Mohd Ali,Ruzzana Abu Bakar,Erlane K Ghani

doi:10.28992/ijsam.v2i2.53

Abstract

This study examines the effect of firm internal and external characteristics on risk reporting practices among the Malaysian public listed firms. Specifically, this study focuses on three internal characteristics namely, duality of board leadership, the presence of stand-alone risk management committee, and length of CEO tenure and external characteristics namely, competition, debt governance and auditor quality on the risk reporting practices among the Malaysian public listed firms. Using, content analysis on 200 top public listed firms in Bursa Malaysia, this study shows that one of the external characteristics namely, debt governance significantly influence risk disclosure among the Malaysian public listed firms. This study however, shows that none of the internal characteristics influence risk disclosure among the Malaysian public listed firms. The finding of this study provide further understanding on the nature of risk disclosure of Malaysian public listed firms.

Highlights

Corporate disclosure has been remarkably criticized following the collapse of Enron in the early 2000s and the financial crisis in the East Asian region in mid-1997
This study captured information from Thompson One banker such as information on the years the CEO has started to be in the position, information on total fixed assets of the firm to define the competition level and debt information to calculate debt ratios to identify its leverage level. Other information such as auditor types and the amount of risk information disclosed are captured from additional information in the annual report and since this study focused on public firms, the annual report is obtained from Bursa Malaysia website where it published the annual report of public listed firms
This study provides an attempt to examine the Bursa Malaysia’s listed firm nature on risk reporting disclosure and the extent to which firm risk levels in totality is being disclosed

Summary

Introduction

Corporate disclosure has been remarkably criticized following the collapse of Enron in the early 2000s and the financial crisis in the East Asian region in mid-1997. Lack of consistencies and insufficient risk-related information in the annual report limit the investors in identifying the firms' risk profile and interpreting the annual report (Zeff, 2007) Of consequence, this restricts the investors’ consideration on risk-related factors when making investment decisions (Mokhtar & Mellett, 2013). The extent to which firms are able to assess and be transparent about the management of their various types of risk depends on the choice of disclosing or withholding the information (Buckby et al, 2015) This is consistent with the statement from the Institute of Chartered Accountants in England and Wales (ICAEW, 2011) that inadequate risk information disclosed has been the contributing factor to the financial crisis due to inappropriate investment assessment

Objectives

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Conclusion