The effects of accounting regulations on disclosure practices in Malaysia : the case of segmental reporting

Abstract

The objective of this research is to investigate the effects of local standard that is MASB 22 on disclosure practices among Malaysian companies. In particular, the research investigates whether the introduction of MASB 22 has resulted in greater level of disclosure and compliance rate with respect to segmental reporting in Malaysia. To attain such aim, the research considers whether the new requirements specified in MASB 22 lead to (1) greater number of line of business (LOB) and geographical segments reported by sample companies and (2) companies reporting more items of information about each primary and secondary segment. This paper further examines the extent to which sample companies provided voluntary disclosures for both primary and secondary segments under MASB 22 as compared to the extent of voluntary disclosures under the original IAS 14. Additionally, the research also investigates the level of compliance with MASB 22 for primary and secondary segments in 2003. The final sample of the study consists of top 53 companies listed on the main board of Bursa Malaysia chosen according to market capitalization in 2003. The findings indicate that MASB 22 has improved segment disclosure practices of sample companies. MASB 22 has resulted in greater number of line of business and geographical segments reported by sample companies. There is an overall increase in the number of items of information disclosed for primary and secondary segments after the introduction of MASB 22. Additionally, there is a substantial compliance with regards to mandatory requirements of MASB 22 by sample companies in 2003 for both primary and secondary segments. On a less positive note, voluntary disclosure practices with respect to reported segments are rarely practiced by sample companies in both 2000 and 2003. Nonetheless, for primary segments, the voluntary disclosures have improved in 2003 as compared to voluntary disclosures in 2000. Voluntary disclosures for secondary segments are limited in both years.