Competitive disadvantage and segment disclosure: evidence from Malaysian listed companies

Abstract

PurposeThis paper seeks to investigate the level of competitive disadvantage experienced by Malaysian listed companies by disclosing segmental information as required by the new accounting standard on segments disclosure by Malaysian Accounting Standards Board.Design/methodology/approachA total of 116 Malaysian listed companies are included in the study. Their annual reports for financial year ended 2002 are the main sources. The dependent variable is competitive disadvantage, which is proxied by Total Performance Index. The independent variables are quality of segmental disclosure by employing weighted average correlation technique, size of companies, the use of stricter accounting standard and the choice of business segment or geographical segment as the primary segment. To examine the developed hypotheses of the study; a multivariate least square regression model is employed. The analysis is also supported by correlation technique.FindingsThe outcomes of the study indicate that competitive disadvantage exists by disclosing segments information but it is not significant. In addition, larger companies experience greater competitive disadvantage than smaller companies, more extensive segment disclosure standard leads to less competitive disadvantage and the state of competitive disadvantage is greater when geographical segment is disclosed as the primary segment.Research limitations/implicationsSince the standard allows the reporting companies to disclose their segment information based on internal structure of the organization, the potential existence of materiality judgement may distort the comprehensiveness of the outcome. In addition, the limited number of companies included in the final sample leads to a more cautious approach in generalizing the findings.Practical implicationsSince the new accounting standard governing segment disclosure in Malaysian environment took effect in 2002, the study is considered timely. It allows the relevant accounting bodies to continue monitoring the level of compliance among the listed companies towards the new standard and, more importantly, it permits further improvement of the standard given the level of competitive disadvantage that may be experienced by reporting companies.Originality/valueThe remarkable contribution of the study lies in its timely effort to investigate the potential competitive disadvantage suffered by reporting companies in the first year of the implementation of the new accounting standard governing segment disclosure.

Market risk disclosure: evidence from Malaysian listed firms

“…Previous studies (Lazar et al , 2006) have examined the adoption of FRS standards in general, and do not explore the compliance with one FRS standard in particular. Our paper is similar to Talha et al (2007) who examined the competitive disadvantage of segmental disclosure for sample of 116 firms under the requirement of MASB 22 Segment Reporting, and the risk reporting issues in Islamic Banks in Malaysia examined by Ariffin (2004).…”

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“…Prior studies have argued that the size of the company can have a significant impact on the extent to which segmental information is disclosed in developed (Rennie and Emmanuel, 1992; Ettredge et al , 2005; Tsakumis et al , 2006) and developing countries (Talha et al , 2006; Talha et al , 2007; Suwaidan et al , 2007). These investigations have documented that large companies disclose more segmental information than their small‐ and medium‐sized counterparts.…”

Enterprise resource planning enabling segmental information reporting practices of UK‐FTSE 100

“…The ratio of total debt to common equity represents the Leverage (Al‐Shammari et al , 2008). The current ratio demonstrates the liquidity (Talha et al , 2008; Enqvist et al , 2014). The return on equity represents the Profitability (Aǧca and Önder, 2007; Hossain, 2007; Samaha et al , 2012).…”