Do audit committee structure increases influence the level of voluntary corporate governance disclosures?

Abstract

Purpose The purpose of this paper is to provide an insight into the voluntary corporate governance disclosure and AC practices among Malaysian property listed companies. Along with that, the influence of AC characteristics on voluntary corporate governance disclosure was also examined. Design/methodology/approach The study used the content analysis of annual reports to extract voluntary corporate governance disclosures and audit committee (AC) practices. The relationship between voluntary corporate governance disclosures and AC characteristics was examined by using the panel data regression analysis. Findings Based on the results of the study, it can be concluded that all three variables: AC size, AC independence and AC meetings are the factors that influence the level of voluntary corporate governance disclosure among sampled companies. Practical implications This study provides an overview of voluntary corporate governance disclosures practices, which have shown an increasing trend of information disclosed by Malaysian listed property companies. Additionally, the AC structure was also found satisfactory with highly independent and higher number of meetings as required by Malaysian Code of Corporate Governance and Bursa Malaysia requirement. Social implications By filling the gap identified in this study, investors’ confidence will boost as they will have sufficient information about the Malaysian listed property companies – resulting in strengthening competitiveness and growth by attracting local and foreign investments in the country. The influence of AC attributes over the quality of disclosure among Malaysian listed properties companies is identified, and regulators introduce more explicit rules for AC mechanism for improving the disclosure quality. The increase in the quality of information provided in the annual reports will lead toward highly efficient and transparent stock market. Originality/value This study has provided an insight into corporate governance of listed companies in Malaysia, which will contribute to the extended literature. Along with that, it will also provide an overview of corporate governance structure among Malaysian listed companies to the policy makers.

An empirical study: characteristics of business entities and corporate governance on risk disclosure practices

“…More the number of audit committee members, the company will improve the information disclosure (Ho and Wong 2001). The results of the prior study showed that the size of the audit committee has a significant positive effect on disclosure (Li et al 2012, Li et al 2008, Madi et al 2014; positively and significantly influence the voluntary disclosure of corporate governance (Talpur et al 2018); does not affect risk disclosure (Elzahar and Hussainey 2012). The next hypothesis in this paper is as follows:…”

“…The existence of an audit committee is significant in increasing the value of annual reports and reducing information asymmetry (Talpur et al 2018) and is part of the internal control system in corporate governance (Al-Maghzom et al 2016). Cotter and Silvester (2008) stated the supervisory function is not only crucial in the structure and composition of the council, but also for committees of business entity, especially in decision making.…”

“…Audit committee activity is reflected in the number of audit committee meetings during one financial year (Talpur et al 2018). The holding of the meeting can help the committee exchanged information, including the risk of the company to allow the identification and minimizes the risk of doing.…”

“…Some studies showed a significant positive correlation between business entity age and compulsory disclosure (Owusu-Ansah and Yeoh 2005, Owusu-Ansah 1998, Al-Shammari et al 2008; voluntary disclosure (White et al 2007); there is no significant correlation between business entity age and corporate exposure (Bukh et al 2005, Al-Mutawaa and Hewaidy 2010, Talpur et al 2018. The level of risk significantly associated with risk disclosure (Hassan 2009, Probohudono et al 2013, Oliveira et al 2011; intellectual capital disclosure (White et al 2007); not significantly associated with social responsibility disclosure (Siregar and Bachtiar 2010).…”

“…The variable of the audit committee size has a significant positive impact on exposure (Li et al 2008, Li et al 2012, Madi et al 2014; does not affect risk disclosure (Elzahar and Hussainey 2012). The frequencies of audit committee meetings (MAC) has positively significantly related to the extent of corporate disclosure (Li et al 2008, Li et al 2012, Taliyang and Jusop 2011, Ettredge et al 2011, Allegrini and Greco 2013, Talpur et al 2018. Al-Maghzom et al (2016) also show that audit committee meetings more often motivate banks to disclose more risk information.…”