Roshayani Arshad

Corporate social responsibility disclosure and interaction effects of ownership structure on firm performance

This study examines the effects of Corporate Social Responsibility (CSR) activity as a business strategy towards creating value for the company. Using the annual reports of 242 Malaysian listed companies, this study investigates the effects of CSR disclosure and firm performance in 2006 and 2008. This study also examines the interaction effects of ownership structure on this relationship. Results of this study provide evidence that CSR activity has the propensity to impact significantly on a companys success. The insignificant results reported in relation to the interaction effects of family and government ownerships further corroborate the strategic importance of CSR activities and disclosure decisions by managers in Malaysia. Overall, findings in this study indicate that CSR activities can potentially lead to strong financial performance. In addition, it also provides regulatory bodies with enhanced understanding in their efforts to improve CSR activities and disclosures even in agency setting characterised with the existence of dominant owners.

Prediction of Business Failure and Fraudulent Financial Reporting: Evidence from Malaysia

Fraud has been of concern for many corporate managers and regulators since many businesses have been victim of business failures. Business failure corporations have reported and become an element of fraudulent financial reporting.Therefore, the first aim of this study is to examine whether a collective prediction tool can be used to predict business failure and fraudulent financial reporting.The second and more important objective of this study is to examine whether business failure companies are associated with fraudulent financial reporting. The collective prediction tool is based on ratio analysis, Beneish M-score model and Z-score model. Using publicly available information in the annual reports of 24 failed firms matched with 24 non-failed firms listed on Bursa Malaysia, relevant information are extracted and applied in the three models to assist in predicting business failure and detecting fraudulent financial reporting. A total of 10 ratios, cash conversion cycle, Beneish M-score model and Altmans Z-score model were identified for examination as potential predictors of business failure and fraudulent financial reporting. Based on the results, the model was accurate in classifying the total sample of approximately 96 per cent as predictors of business failure and approximately 83.3 per cent as predictors of fraudulent financial reporting as well as predicting the relationship between business failures and fraudulent financial reporting. Hence, it can be concluded that these model functions effectively and can be adopted by regulators, bankers, management, internal and external auditors and to the forensic accountants so that proper preventive or corrective action can be taken to mitigate fraud at its inception.

Human Capital and Islamic-Based Social Impact Model: Small Enterprise Perspective

The concept of value creation incorporating both the economic and social values is in line with the Islamic perspective of amanah (trust). The information on social values allows organisations to demonstrate their ethical accountability and in turn gain legitimacy and support particularly for organisations operating in Muslim dominated stakeholders’ environment. While the measurement for economic values is generally available, the measurement of social values/impacts has encountered many difficulties, particularly in formulating acceptable measures. Hence, the objective of this study is to provide some preliminary evidence in measuring social values for relevant stakeholders as a result of business activities. In achieving this objective, this study focuses on one aspect of social output, i.e. the development of human capital through the medium of entrepreneurship education at the university for a group of small entrepreneurs. The findings revealed that social output/values are measurable and can be used in enhancing support for the organisations, particularly the provision of Islamic-based micro-finance and other forms of Islamic fundings such as waqf, zakah and saddaqa (charity) as well as the formulation of relevant strategic models in support of developing Islamic-based sustainable organisations. Islamic-based sustainable organisations can play an important role in enhancing societal and economic development.

Catch the “Warning Signals”: The Fight against Fraud and Abuse in Non-Profit Organisations☆

Abstract Over the last few years, almost every day, the media has reported increasing fraud and abuse cases. The cases reported are irrespective of being committed by for-profit organisations or non-profit organizations (NPOs). This proves that fraud has become a disease that is spreading and increasing worldwide, and Malaysia is not an exception. As NPOs are formed to further charity and noble purposes, it comes as a surprise that NPOs have become conduits for fraudulent acts such as the embezzlement of funds by fraudsters and the misuse of the collection of charitable funds for personal benefit. In line with this, the objective of this paper is to provide review of warning signals from both financial and non-financial indicators influencing the occurrence of fraud and abuse. The overall review contributes to the literature on warning signals of fraud and abuse in NPOs. It will also provide useful insight for the relevant regulators and NPOs, in establishing and implementing effective risk management, using a risk-based approach and board effectiveness perspectives in protecting the NPOs from being a victim of fraud and abuse.

Corporate Governance and Business Capabilities: Strategic Factors for Corporate Social Responsibility Reporting

Corporate Social Responsibility (CSR) is a topical business issue in the current accountability-integrity age. This paper aims to examine and interpret the possible link between corporate governance, business capabilities and CSR reporting practices. Specifically, agency and resource-based theories were used as the underpinning theoretical perspectives in understanding the link between the corporate governance mechanism and their business capabilities with CSR reporting. Using a content analysis of the annual and sustainability reports, the relevant data were gathered from 100 leading companies listed on Bursa Malaysia. The results of the study revealed that corporate governance mechanism, in particular, board size has a significant potential to induce company/‘agents’ to engage in CSR reporting practices hence reducing agency costs. In the context of business capabilities, human resources in the form of commitment of top leadership to CSR initiatives was found to be a strategic factor in enhancing the CSR information disclosed. The companies’ engagement with stakeholders through social dialogues also assisted companies in reducing information asymmetry resulting in the maximization of shareholders’ interest.

Corporate governance structure, regulatory regimes and voluntary disclosures

Voluntary disclosures communicated to investors are subject to considerable discretion of the disclosing companies. While regulated disclosure under the IFRS convergence could be a solution to greater transparencey, the benefits of such disclosure is still inconclusive. Hence, it is important to monitor managers voluntary disclosure decisions to be more align with the interests of the investors. Using the annual reports of 155 Malaysian listed companies, this study examines the influence of several corporate governance structures on managers voluntary disclosure decisions in two different regulatory regimes in Malaysia. Corporate governance structures examined are those related to the influence of family ownership, government ownership and independent non-executive directors. An examination of the determinants of VDISC by companies operating in different agency setting and in different regulatory regimes will provide useful information to regulators in promoting more detailed voluntary disclosures. Results of the study reveal that a general emphasis on corporate transparency is insufficient in promoting more detailed disclosure of voluntary information to investors. In contrast, an external governance mechanism through an improved regulation on governance has the potential to improve monitoring effectiveness by government owners and independent non-executive directors in increasing the extent of VDISC. At the same time, it potentially reduces the negative influence of family owners on VDISC. Finally, the mandatory requirements through IFRS compliance further promote the alignment of some corporate governance mechanisms with those of the external regulatory body.

Adoption of IFRS in Malaysia and the information content of earnings

This study examines the impact of IFRS adoption on the information content of reported earnings in Malaysia. This is based on an investigation of the information content of earnings for the years 2004 to 2008, involving 2521 firm-year observations. Overall, the results indicate that IFRS adoption has positive impact on the information content of earnings. However, the results revealed that earnings demonstrated higher information content during the periods before the adoption of the IFRS. The lower information content of earnings revealed in the year of the adoption and subsequent year infers that the financial reporting infrastructure is moving towards full convergence with the IFRS. Once this is accomplished, it is expected that the adoption of IFRS in Malaysia will result in information-oriented financial reports that provide useful information to investors and other stakeholders. This is consistent with the improved information content of earnings in 2008. These findings provide regulatory bodies with enhanced understanding in their efforts to improve the financial reporting quality in Malaysia.

The impact of ownership structure on stock returns

This paper examines the impact of ownership structure on stock returns of 150 companies listed on Bursa Malaysia in 2008. Ownership structure is characterized by insider ownership and concentrated ownership. Stock return is represented by stock return index. The result showed there is no significant relationship between insider ownership and stock returns. However, there is a significant negative relationship between concentrated ownership and stock returns.