Type
Essay
Pages
18 pages
Word Count
8686 words
School
70200
Course Code
70200

70200

September 25, 2020
Asian Journal of Finance & Accounting
ISSN 1946-052X
2011, Vol. 3, No. 1: E9
www.macrothink.org/ajfa
138
Internet Financial Reporting in Malaysia:
The Preparers’ View
DR KIEW-HEONG YAP (Corresponding author)
Faculty of Business and Accountancy
University of Malaya, 50603 Kuala Lumpur
Tel: 60-1-6371-7660, 60-3-6250-1367 E-mail: [email protected]
DR ZAKIAH SALEH
Faculty of Business and Accountancy
University of Malaya, 50603 Kuala Lumpur
E-mail: [email protected]ail.com
Received: November 8, 2011 Accepted: November 18, 2011 Published: December 1, 2011
doi:10.5296/ajfa.v3i1.1067 URL: http://dx.doi.org/10.5296/ajfa.v3i1.1067
Abstract
This paper reports the opinion and awareness of the Internet financial reporting (IFR) from
the preparers’ perspectives and examines the individual firm motives to engage the IFR. The
researchers interviewed ten senior managers using semi-structured and in-depth
questionnaires to seek their views and opinions on IFR issues. Among the three main
motivations to engage in IFR are: first, companies want to be more transparent in
disseminating company information. Second, the companies use the Internet to promote their
products and services to create a good brand name in the industry. Lastly, these companies are
a strong believer of good corporate governance best practices in promoting greater
transparency. 90% of the respondents claimed ownership structure influenced IFR, and 70%
of the respondents agreed industry members and firm size influenced such reporting practice.
As for corporate governance mechanisms, only 34% of the respondents agreed corporate
governance influenced IFR. This paper bridges the gap by interviewing preparers concerning
influences of corporate governance and ownership structures on IFR. Among the more
significant issues highlighted by the respondents are the security of the Web site, timeliness
of reporting and adoption of XBRL.
Keywords: Internet financial reporting, Preparers’ views
Asian Journal of Finance & Accounting
ISSN 1946-052X
2011, Vol. 3, No. 1: E9
www.macrothink.org/ajfa
139
1. Introduction
Internet is becoming a popular mean of communication with all stakeholders. Many
corporations in developed and developing economies have a dedicated Web site to
communicate financial information with the investors. This reporting practice is called
Internet financial reporting (IFR). IFR can be defined as ‘the public reporting of operating
and financial data by a business enterprise by the World Wide Web or related Internet-based
communications medium” (Lymer et al., 1999, p.2). Internet reporting activities are largely
driven by preparers who use it to market their products or services. Reporting companies may
be motivated by the benefits of communicating information by the Internet. These benefits
included: providing companies for global marketing, decreasing the distribution cost of hard
copy financial statements, communicating information cheaper, wider and faster; and
facilitating interaction with stakeholders (Xiao et al., 2002).
There have been much empirical work carried out for IFR by the practitioners and
academicians from the developed economies, however, only limited studies have offered
some reasons about the relationship between the opinion, motivation and influences of IFR,
especially for Malaysia. Past Malaysian studies were mainly descriptive in nature (Nik Salleh
and Mohamad, 2000; Jamaliah et al., 2001; Mohamad et al., 2003), and examined few factors
that influenced the IFR (Hassan et al., 1999; Ismail and Tayib, 2000; Gan and Susela, 2002;
Abdul Hamid et al., 2004). The study on the perception of preparers was solicited by mailed
questionnaire (Hassan et al., 1999; Ali Khan and Ismail, 2009). This paper argues further
research could try other approaches, such as in-depth interviewing with the preparers.
According to Saunders et al. (2009), semi-structured and in-depth interviews provide an
opportunity to the researchers to ‘probe’ answers, where he/she wants an explanation from
interviews to build on their responses. Interviewees may use ideas or words in a specific way,
and probing of these meanings will add depth and significance to the data collected. They
may also lead the discussion into areas that are important for understanding and had not been
previously considered by the researchers. Therefore, this study tries to bridge the gap by
interviewing ten senior managers to seek their views and opinions on influences of corporate
governance and ownership structures on IFR. This paper reports the opinion and awareness of
the IFR from the preparers’ perspectives and examines the individual firm motives. Views on
the influences of corporate governance mechanisms and ownership structures are sought and
the disclosure theories are used in the data interpretation process. IFR issues highlighted by
the respondents are presented.
The remainder of this paper is organised as follows. Section 2 reviews the prior interviews
studies of IFR. Section 3 outlines the research method. Section 4 discusses the result of the
in-depth semi-structure interview with the respondents. This section is divided into 3
sub-sections – Section 4.1 presents the opinion and awareness of the managers; and Section
4.2 discusses the individual firm motives. The interview data obtained from each respondent
are analysed to find out the themes and summarised into tables. Views on the influences of
corporate governance mechanisms and ownership structures are presented in Section 4.3. The
disclosure theories are used in the data interpretation process (Section 4.4). Lastly, IFR issues
highlighted by the respondents are discussed in Section 4.5. Finally, the results are concluded
Asian Journal of Finance & Accounting
ISSN 1946-052X
2011, Vol. 3, No. 1: E9
www.macrothink.org/ajfa
140
in Section 5.
2. Literature Review
2.1 Interviews
Studies on the views of interested parties on IFR started since 1999. The Internet has been
described as “a new platform for distributing financial information” (Hassan et al., 1999, p.1).
It is a platform that shows distinctive and attractive features, which makes it an effective
choice when compared with the traditional platform. Hassan et al. (1999) studied the opinions
of Malaysian chief financial officers (CFO) on the usefulness, benefits and costs of the
Internet disclosure and reporting of financial information. They used a mailed questionnaire
to seek the opinions of the controllers, which achieved a response rate of 35.04%. The
findings suggest the benefits, to both the companies and the users of financial information,
are perceived to be greater than the costs of adopting the Internet as another medium of
communicating and disclosing corporate financial information.
Increasingly, companies are using the Internet to present financial information. However, there
is little published literature on the extent of this new medium that is shaping the future of
corporate reporting practices (Xiao et al., 2002). To widen the participation in the debate, they
propose the non-technological and technological factors will decide the future of IFR; there is a
range of different views in other areas obtained from 17 U.K. experts including regulators,
auditors, academics, reporting companies and users of corporate reports. Some opinions are
non-technologically driven such as resistance to changes in technology, regulators are slow to
react and users are not interested in reading financial reports, whereas, others pay more
attention to technology factors. Some experts adopt a more progressive or even radical
perspective, while others do not foresee any financial reporting changes within the short period
of time. The experts did not address some important issues such as the relative importance of
the identified contingency factors that will affect the changes related to Internet; the state of
these factors will take effect, and the integration impact of Internet with data processing
systems.
A study by Beattie and Pratt (2003) reports the findings of a U.K. study about the views of 500
individuals from preparers, various user groups and auditors on newly emerging practices and
specific change proposals. They found users like the scope expanded by the Web. All groups
found the range of navigation aids; search aids and file formats were least useful. File format
preferences vary across the groups. Paired group comparison shows the views of the preparers
and users differ substantially, while expert and non-expert users hold the same views on many
issues. Generally, auditors’ views fall between the views of preparers and users. This study has
three specific limitations. First, the extent to which members of ProShare and UKSA
representing the private shareholders population is unknown. Second, it is unclear how or why
industry membership might influence the views of financial company finance directors,
because these views were not sampled. Third, this study considered the U.K. settings and
participants only.
Asian Journal of Finance & Accounting
ISSN 1946-052X
2011, Vol. 3, No. 1: E9
Jones and Xiao (2004) report the results of a Delphi study into corporate financial reporting by
2010, in which 20 U.K. experts in accounting and the Internet, representing regulators, auditors,
academics, reporting companies and users, took part in the study. They conclude the financial
reporting package would change into “a core of general-purpose, standardised information (in
both the hard copy and Internet version) with a non-core general purpose and customised
information” (Jones and Xiao, 2004, p.1). Prior studies suggested radical changes such as raw
data disclosure and real-time reporting would not occur, at least to the core package.
Regulators will adopt a minimalist approach while auditors will be cautious and reactive.
Standardisation and customisation will be the fundamental dilemma of Internet financial
reporting in the future.
Most recent study by Ali Khan and Ismail (2009) examined the factors that influence
Malaysian companies to engage in IFR. This paper sought the opinions of preparers of
financial information by a mailed questionnaire. The findings suggest three factors that firms
perceive as important: (1) enhance corporate image, (2) company teller with the technology