6.4 User Groups and Their Information Needs 181 6.5 Development of Hypotheses 184 6.6 Information Items Included in the Scoring Sheet 186 6.7 Disclosure Index 188 6.8 Summary and Conclusion 194 CHAPTER SEVEN: DATA SETS 7.1 Introduction 196 7.2 Objectives of the Study 196 7.3 Data Sets Employed 197 7.4 Construction of the Questionnaire 197 7.5 Questionnaire Administration 198 7.5.1 Non-Response Bias 202 7.6 Selection of Sample Companies 204 7.7 Description of the User Sample 207 7.8 Data Analysis 210 7.9 Summary and Conclusion 212 V CHAPTER EIGHT: RESULTS OF ANALYSIS ON PERCEPTIONS OF USERS - SURVEY I 8.1 Introduction 214 8.2 Hypotheses for the Users' Perceptions Study 215 8.3 Purpose of Using the Annual Report 215 8.4 Ranking of Various Information Sources 218 8.5 Importance of Different Parts of the Annual Report 222 8.6 Influence of Different Parts of the Annual Report 225 8.7 Thoroughness in Reading the Annual Report 227 8.8 Summary and Conclusion 229 V CHAPTER NINE: RESULTS OF ANALYSIS ON PERCEPTIONS OF USERS - SURVEY II 9.1 Introduction 230 9.2 Ranking of Items 230 9.3 Comparison with Previous Studies on Users' Perceptions 239 9.4 Summary and Conclusion 244 CHAPTER TEN: RESULTS OF THE ANNUAL REPORT SURVEY 10.1 Introduction 258 10.2 Companies Chosen for the Sample 259 10.3 The Disclosure Index and Disclosure Pattern 259 10.4 Mandatory and Voluntary Disclosure 266 10.5 Disclosure of Individual Items of Information 271 10.6 Disclosure by Industry 274 10.7 Level of Corporate Disclosure and Expectation of Users 275 10.8 Comparison with Wallace (1987) and Karim (1995) Studies 277 10.9 Summary and Conclusion 280 CHAPTER ELEVEN: CORPORATE CHARACTERISTICS AND EXTENT OF DISCLOSURE 11.1 Introduction 305 11.2 Hypothesis of the Study 306 11.3 The Dependent and Explanatory Variables 307 11.3.1 Dependent Variables 307 11.3.2 Explanatory Variables 308 11.4 Estimation Procedure 326 11.4.1 Results of Regression Analyses 330 11.4.1.1 Reduced Regression - Overall Disclosure Index 332 11.4.1.2 Reduced Regression - Mandatory Disclosure Index 334 11.4.1.3 Reduced Regression - Voluntary Disclosure Index 336 11.4.1.4 Full Regression - Overall Disclosure Index 338 vi 11.4.1.5 Full Regression - Mandatory Disclosure Index 340 11.4.1.6 Full Regression - Voluntary Disclosure Index 343 11.4.1.7 Regression for Fixed Explanatory Variables 345 11.4.1.8 Treatment for Firm Size Variables 350 11.5 Discussion of the Results 361 11.6 Comparison of Results with Other Studies 369 11.7 Test for Multicollinearity 371 11.8 Summary and Conclusion 372 CHAPTER TWELVE: CONCLUSIONS, LIMITATIONS AND FUTURE RESEARCH 12.1 Introduction 376 12.2 The Background of the Study 376 12.3 Conclusions and Major Findings 378 12.3.1 Hypothesis 1: Users' Purposes of Using the Annual Reports 379 12.3.2 Hypothesis 2: Importance of Various Sources of Information 380 12.3.3 Hypothesis 3: Importance of Various Parts of the Annual Reports 380 12.3.4 Hypothesis 4: Influence of Different Parts of the Annual Reports 381 12.3.5 Hypothesis 5: Thoroughness in Reading the Annual Reports 381 12.3.6 Hypothesis 6: Users' Perceived Importance on Selected Information Items 382 12.3.7 Hypothesis 7: Disclosure Indexes - Disclosure Practices 382 12.3.8 Hypothesis 8: Compliance with Disclosure Regulations 383 12.3.9 Hypothesis 9: Disclosure Indexes - Disclosure Practices Across Industries 383 12.3.10 Hypothesis 10: Users' Perceptions and Disclosure Practices 384 12.3.11 Hypothesis 11: Disclosure Indexes - Corporate Attributes 384 12.4 Limitations and Problems 385 12.5 Recommendations for Future Research 388 Bibliography 391 vi' LIST OF TABLES Table 3.1 Previous Studies on the Perceived Importance of Information Items by Different User Groups 96a Table 3.2 Studies on Disclosure Index and Corporate Attributes Associated with Disclosure Scores 96c Table 4.1 Malaysia: Economic Growth Rates (1982-1998) 105 Table 4.2 Malaysia: Basic Economic Indicators (1994-1995) 107 Table 4.3 Malaysia: Structure of Merchandise Imports and Exports 109 Table 4.4 Direction of Trade (January - August 1995) 110 Table 4.5 Accounting Organisation Recognised by the MTA 112 Table 4.6 MIA Committee Divisions 117 Table 4.7 MACPA Committee Divisions 120 Table 5.1 MACPA Statement No. 4: Format for the Presentation of Financial Statements 171 Table 5.2 Approved International Accounting Standards (lAS) 157 Table 5.3 MIA Exposure Draft 158 Table 5.4 Approved Malaysian Accounting Standards (MAS) 159 Table 5.5 lASs and MASs Being Considered for Exposure Draft 159 Table 6.1 Distribution of Disclosure Indexes 188 Table 7.1 Questionnaires Distribution 213 Table 7.2 Time of Reply to Questionnaire 203 Table 7.3 Distribution of Sample Companies 206 Table 7.4 Biodata of Respondents 208 Table 8.1 Purposes of Using Annual Report by User Groups 216 Table 8.2 Mann-Whitney Test on the Purposes of Using the Annual Report 217 Table 8.3 Other Purposes of Using the Annual Report 218 Table 8.4 Ranking of Information Sources 219 Table 8.5 Mann-Whitney Test on the Ranking of Information Sources 221 Table 8.6 Ranking of Parts of Annual Reports 222 Table 8.7 Mann-Whitney Test on Ranking of Parts of Annual Reports 224 Table 8.8 Degree of Influence of Parts of Annual Reports 225 viii Table 8.9 Mann-Whitney Test on the Degree of Influence of Parts of the Annual Report 227 Table 8.10 Degree of Thoroughness in Reading the Annual Report 228 Table 8.11 Mann-Whitney Test on the Degree of Thoroughness in Reading the Annual Report 229 Table 9.1 Mean Importance of Disclosure Items 231 Table 9.2 Mann-Whitney Test on the Perceptions of Two User Groups 246 Table 9.3 Test of Difference (t-test) for Users Mean Scores 249 Table 9.4 Comparative Mean Perception Scores of Previous and Present Studies 250 Table 9.5 Person Coefficient of Correlation 'r' for Mean Perception Scores 242 Table 9.6 Spearman rho Correlation Coefficient for Mean Perception Scores 242 Table 9.7 Degree of Disagreement Among Users Across Three Studies 243 Table 9.8 Previous Studies on Consensus Between Accountants and Financial Analysts 256 Table 10.1 Applicability of Disclosure Items Based on Disclosure Index for 1974, 1984 and 1994 260 Table 10.2(a) Ten Top Ranking Companies for 1974, 1984 and 1994 261 Table 10.2(b) Ten Lowest Ranking Companies for 1974, 1984 and 1994 262 Table 10.3(a) Descriptive Statistics Based on Disclosure Index for 1974 263 Table 10.3(b) Descriptive Statistics Based on Disclosure Index for 1984 263 Table 10.3(c) Descriptive Statistics Based on Disclosure Index for 1994 264 Table 10.4(a) t-test of Difference in Mean Score for Overall Disclosure Score 281 Table 10.4(b) t-test of Difference in Mean Score for Overall Raw Score 281 Table 10.4(c) t-test of Difference in Mean Score for Balance Sheet Items 282 Table 10.4(d) t-test of Difference in Mean Score for Profit and Loss Items 282 Table 10.4(e) t-test of Difference in Mean Score for Other Financial Statement Items 283 Table 10.4(f) t-test of Difference in Mean Score for Accounting Policy Items 283 Table 10.4(g) t-test of Difference in Mean Score for Ratios and Statistics Items 284 Table 10.4(h) t-test of Difference in Mean Score for Directors' Statement Items 284 ix Table 10.4(i) t-test of Difference in Mean Score for Projection and Budgetary Items 285 Table 10.4(j) t-test of Difference in Mean Score for Social Reporting Items 285 Table 10.5(a) Descriptive Statistics for Disclosure Indices - 1974 266 Table 10.5(b) Descriptive Statistics for Disclosure Indices - 1984 266 Table 10.5(c) Descriptive Statistics for Disclosure Indices - 1994 267 Table 10.6(a) t-test of Difference in Mean Score for Mandatory Items 267 Table 10.6(b) t-test of Difference in Mean Score for Voluntary Items 268 Table 10.7 Disclosure of Mandatory Items 286 Table 10.8 Disclosure of Voluntary Items 288 Table 10.9 Combined and Segregated Disclosure Items for 1974, 1984 and 1994 272 Table 10.10 Items Disclosed by Less than 5% of Companies 290 Table 10.11 Items Disclosed by More than 95% of Companies 293 Table 10.12 Industry-wise Disclosure 274 Table 10.13 Summary of Users' Responses and Companies Disclosure Practices 299 Table 10.14 Comparison of Item-wise Disclosure in Three Studies 303 Table 10.15 Comparative Disclosure Levels Between Three Developing Countries Studies 279 Table 11.1 Distribution of Three Disclosure Indices 307 Table 11.2 Summarised Mean Disclosure Scores Based on Dummy Variables (1974, 1984 and 1994) 323 Table 11.3 List of Variables , Their Code Names and Expected Signs in the Regressions 324 Table 11 .4A Descriptive Statistics for All Variables - 1974 325 Table 11 .4B Descriptive Statistics for All Variables - 1984 325 Table 11 .4C Descriptive Statistics for All Variables - 1994 326 Table 11.5 (A-C) Correlation Coefficients Between Variables 327 Table 11 .5D Codes for Variables Used in Regression Analysis 331 Table 11.6 Results of the Reduced Regression of Overall Disclosure Index on Firm Characteristics 332 x Table 11.7 Results of the Reduced Regression of Mandatory Disclosure Index on Firm Characteristics 334 Table 11.8 Results of the Reduced Regression of Voluntary Disclosure Index on Firm Characteristics 336 Table 11.9 Results of the Full Regression of Overall Disclosure Index on Firm Characteristics 338 Table 11.10 Results of the Full Regression of Mandatory Disclosure Index on Firm Characteristics 341 Table 11.11 Results of the Full Regression of Voluntary Disclosure Index on Firm Characteristics 343 Table 11.12 Results of the Standardised Regression of Disclosure Indexes on Firm Characteristics - 1984 346 Table 11.13 Results of the Standardised Regression of Disclosure Indexes on Firm Characteristics - 1994 348 Table 11.14 Results of the Regression of Overall Disclosure Index on Firm Size Variables - 1994 351 Table 11.15 Results of the Regression of Mandatory Disclosure Index on Firm Size Variables - 1994 354 Table 11.16 Results of the Regression of Voluntary Disclosure Index on Firm Size Variables - 1994 358 Table 11.1 7A Summary of Regression Results for Overall Disclosure Index: Explanatory Power of Firm Characteristics Under Three Regression Models 363 Table 11.1 7B Summary of Regression Results for Mandatory Disclosure Index: Explanatory Power of Firm Characteristics Under Three Regression Models 363 Table 11.1 7C Summary of Regression Results for Voluntary Disclosure Index: Explanatory Power of Firm Characteristics Under Three Regression Models 364 Table 11.18 (A-C) Summary of Regression Results Using One Size Variable at a Time for 1994 364 xi LIST OF FIGURES Figure 1.1 Research Methodological Flowchart 9 Figure 2.1 Disclosure Dimensions 13 Figure 2.2 Factors Influencing Corporate Financial Disclosure 35 Figure 2.3 Corporate Typologies, by Orientation and Ownership 36 Figure 6.1 Criteria for Scoring Disclosure Items 195 LIST OF APPENDICES Appendix 7.1 Copy of Questionnaire on Perceptions 417 Appendix 10.1 Check List of Disclosure Items 438 Appendix 10.2 Disclosure Indices 443 Appendix 10.3 Components of Disclosure Index 445 Appendix 10.4 Item-wise Disclosure by Companies 449 xli LIST OF ACRONYMS AND ABBREVIATIONS AFA ASEAN Federation of Accountants ASEAN Association of South East Asian Nations CAPA Confederation of Asian and Pacific Accountants ECOSOC Economic and Social Council EEC European Economic Community EU European Union FTC Foreign Investment Committee lAS International Accounting Standard IASC International Accounting Standards Committee ICA International Congress of Accountants ICFTU International Confederation of Free Trade Unions IFAC International Federation of Accountants IFTU International Federation of Trade Unions IMF International Monetary Fund 'OSCO International Organisation of Securities Commissions KLSE Kuala Lumpur Stock Exchange MACPA Malaysian Association of Certified Public Accountants MAS Malaysian Accounting Standard MIA Malaysian Institute of Accountants MNC Multinational Corporation NIB Newly Industrialised Economies OECD Organisation of Economic Cooperation and Development ROC Registrar of Companies SC Securities Commission UK United Kingdom UN United Nations US/USA United States of America UNCTAD United Nations Conference on Trade and Development UNCTC United Nations Centre on Transnational Corporation XIII ACKNOWLEDGEMENTS Praise to Allah, the Most Gracious, the Most Merciful who gave me the physical, mental and spiritual strength to complete this research amidst many difficulties. I would like to convey my sincere thanks and appreciation for those people and institutions that have contributed directly or indirectly in no small measure to the completion of this research. It is a pleasure to acknowledge the financial assistance provided by the Malaysian Government especially Universiti Utara Malaysia (UTJM) who have provided the scholarship for the whole duration of the study under its training scheme and also the UTJM's Research and Consultancy Centre for providing the research grant for this study. Several courses provided by UTJM on research methodology and manuscript writings prior to coming to UK have proved to be very useful in carrying out the research project. I owe a great deal to Professor A. R. Appleyard who agreed to supervise me throughout the period of the research. He provided me with helpful comments on the scope and methodologies of this research and the design and content of this thesis. His constructive criticism and prompt feedback on the writing up of the chapters especially for the submission of the first draft of the thesis were an invaluable asset. The helpful comments and suggestions from Professor Dr. Hamzah Ismail (National University of Malaysia) on the design and content of the questionnaire at the early stage of the study, and from Professor R. 5. 0. Wallace (Middlesex University) for his suggestions and for sending me his journal articles relating to questionnaire design are gratefully acknowledged. The Faculty of Law, Environment and Social Sciences of the University of Newcastle provided me with the opportunity to present my research proposal in its Post-Graduate Research Training Programme. My colleagues in the School of Accountancy also provided helpful comments and suggestions that further clarified and sharpened the focus, hypotheses and methodologies of this research. Mr. Abdul Razak Lah (former MIA council member) also helped in verif'ing the xlv