Social Disclosure and Accounting Data: Effects on Share Prices in an Emerging Market
Abstract
Existing literature presents divergent results on the value relevance of accounting information following the adoption of the International Financial Reporting Standards. This highlights the importance of considering local market conditions and regulatory frameworks when analysing how changes in accounting rules affect the value relevance of financial information. Further, researchers emphasised that traditional accounting data alone is inadequate for explaining the value relevance of financial reporting; it should be complemented with non-financial information. Additionally, researchers noted limited research examining the capital market effect of social reporting, especially in emerging markets where social disclosure regulation is significantly increasing. Hence, this study aims to assess the capital market effect of accounting information under the Malaysian Financial Reporting Standards (MFRS) and examine the influence of social information disclosure on the share prices of Malaysian listed firms. Besides, this study explores whether market value is better explained by the combined effects of financial accounting information and social disclosure, as opposed to accounting information alone. Using a more extensive and diverse sample, a panel data analysis was performed for this study. The results show that firms' reported earnings and equity book value significantly influence their share price under the MFRS. The findings highlight the value relevance of accounting information under the MFRS framework, showcasing its role in Malaysia as an emerging market. Hence, Malaysian firms should undertake enhanced measures to engage more closely with MFRS updates. This study also found a significant positive association between social disclosure and firms' share prices, demonstrating that social information disclosure provides incremental value-relevant information beyond traditional financial accounting. The results indicate that enforcing social reporting has a value-enhancing effect on Malaysian listed companies. The findings provide further insights to Malaysian firms on the benefits associated with social reporting practice.
References
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Odoemelam, N., Okafor, R. G., & Ofoegbu, N. G. (2019). Effect of international financial reporting standard (IFRS) adoption on earnings value relevance of quoted Nigerian firms. Cogent Business & Management, 6(1), 1643520.
Ohlson, J. A. (1995). Earnings, book values and dividends in equity valuation. Contemporary Accounting Research, 11(2), 661–686.
Paolone, F., Granà, F., Martiniello, L., & Tiscini, R. (2021). Environmental risk indicators disclosure and value relevance: An empirical analysis of Italian listed companies after the implementation of the Legislative Decree 254/2016. Corporate Social Responsibility and Environmental Management, 28(5), 1471-1482.
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Reverte, C. (2016). Corporate social responsibility disclosure and market valuation: evidence from Spanish listed firms. Review of Managerial Science, 10, 411-435.
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Rao, K. V., Ibrahim, F., & Tadi, M. S. (2023). Value Relevance of Financial Information: A Comparative Study of Pre- and Post-Implementation of Indian Accounting Standards. Investment Management and Financial Innovations, 20(1).
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Rosli, M. H., Said, J., & Fauzi, N. A. (2017). A brief survey of corporate social responsibility in Malaysia. Selangor Business Review, 2(1), 10–19.
Sadiq, M., Singh, J., Raza, M., & Mohamad, S. (2020). The impact of environmental, social and governance index on firm value: Evidence from Malaysia. International Journal of Energy Economics and Policy, 10(5), 555–562.
Sahlian, D. N., Popa, A. F., Banţa, V. C., Răpan, C. M., & Chiriac, S. C. V. (2023). The Value Relevance of Financial Performance and ESG Scores During Tumultuous Economic Periods. Eastern European Economics, 1-19.
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Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., Adzis, A. A., Ahmad, A. H., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value? Finance Research Letters, 39(2021), 1–7.
Zahid, M., Rahman, H. U., Ali, W., Khan, M., Alharthi, M., Imran Qureshi, M., & Jan, A. (2020). Boardroom gender diversity: Implications for corporate sustainability disclosures in Malaysia. Journal of Cleaner Production, 244, 118683.
Zahid, M., Rahman, H. U., Muneer, S., Butt, B. Z., Isah-Chikaji, A., & Memon, M. A. (2019). Nexus between government initiatives, integrated strategies, internal factors and corporate sustainability practices in Malaysia. Journal of Cleaner Production, 241, 118329.
Ahsan, T., Al-Gamrh, B., & Mirza, S. S. (2022). Corporate social responsibility and firm-value: the role of sensitive industries and CEOs power in China. Applied Economics, 54(16), 1844-1863.
Arraiano, I. G. (2020). Is There Value Creation in the Banks Listed in the Dow Jones Sustainability Index Europe?. Responsible Business in a Changing World: New Management Approaches for Sustainable Development, 53-68.
Brooks, C., & Oikonomou, I. (2018). The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance. The British Accounting Review, 50(1), 1–15.
Castro, P., Gutiérrez-López, C., Tascón, M. T., & Castaño, F. J. (2021). The impact of environmental performance on stock prices in the green and innovative context. Journal of Cleaner Production, 320, 128868.
Colleoni, E. (2013). CSR communication strategies for organisational legitimacy in social media. Corporate Communications, 18(2), 228–248.
Cormier, D., & Magnan, M. (2007). The revisited contribution of environmental reporting to investors' valuation of a firm's earnings: An international perspective. Ecological economics, 62(3-4), 613-626.
Cordazzo, M., Bini, L., & Marzo, G. (2020). Does the EU Directive on non‐financial information influence the value relevance of ESG disclosure? Italian evidence. Business Strategy and the Environment, 29(8), 3470-3483.
Dang, H. N., Pham, C. D., Nguyen, T. X., & Nguyen, H. T. T. (2020). Effects of corporate governance and earning quality on listed vietnamese firm value. Journal of Asian Finance, Economics and Business, 7(4), 71–80.
De Klerk, M., de Villiers, C., & van Staden, C. (2015). The influence of corporate social responsibility disclosure on share prices: Evidence from the United Kingdom. Pacific Accounting Review, 27(2), 208–228.
Hardiyansah, M., Agustini, A. T., & Purnamawati, I. (2021). The effect of carbon emission disclosure on firm value: Environmental performance and industrial type. The Journal of Asian Finance, Economics, and Business, 8(1), 123–133.
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1-3), 405-440.
Gaio, C., & Raposo, C. (2011). Earnings quality and firm valuation: International evidence. Accounting and Finance, 51(2), 467–499.
Goh, I. C., Zulkifli, N., & Zaina, D. (2016). Voluntary and mandatory Corporate Social Responsibility Reporting (CSRR): A developing country perspective. International Business Management, 10(24), 5757–5766.
Gomes, L. R., & Costa, J. C. (2022). IFRS Convergence and Value Relevance of Accounting Information: Evidence from Indian Financial Reporting. International Journal of Business and Society, 23(3), 1482-1498.
Hair, J. F., Bill, B., Barry, B., & Anderson, R. E. (2006). Multivariate data analysis (6 ed.). Upper Saddle River, NJ: Pearson.
Harun, M. S., Hussainey, K., Mohd Kharuddin, K. A., & Al Farooque, O. (2020). CSR disclosure, corporate governance and firm value: A study on GCC Islamic Banks. International Journal of Accounting & Information Management, 28(4), 607–638.
Houqe, M. N., van Zijl, T., Karim, A. W., & St George, T. (2021). The value relevance of corporate donations. Pacific-Basin Finance Journal, 66, 101127.
Hummel, K. (2020). The European Union non-financial reporting directive: Evidence on regulatory parameters and firm-value consequences. SSRN Electronic Journal, SSRN(3744653), 1–55.
IASB. (2018). Conceptual framework for financial reporting. https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/part-a/conceptual-framework-for-financial-reporting.pdf
Leuz, C., & Verrecchia, R. E. (2005). Firms’ capital allocation choices, information quality, and the cost of capital. SSRN Electronic Journal, 1–26.
Li, Y., Gong, M., Zhang, X., & Koh, L. (2017). The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. The British Accounting Review Journal, 50(1), 60–75.
Lo, Y. P. (2018). CSR and the sustainability reporting landscape of Malaysia. [online] Available at: https://www.lh-ag.com/wp-content/uploads/2018/12/6-CSR-and-the- Sustainability-Reporting-Landscape-of-Malaysia.pdf
Lourenço, I. C., Branco, M. C., Curto, J. D., & Eugénio, T. (2012). How does the market value corporate sustainability performance?. Journal of Business Ethics, 108(4), 417-428.
Mohd. Ali, M., Saffa, S., Besar, N. T., & Mastuki, N. A. (2018). Value relevance of financial restatements: Malaysian perspective. Journal of Engineering and Applied Sciences, 13(4), 804-808.
Nejad, M. J., Ahmad, A., & Embong, Z. (2017). Value Relevance of Other Comprehensive Income and Its Available-For-Sale Financial Instruments (AFS) and Revaluation Surplus of Property, Plant and Equipment (REV) Components. Asian Journal of Accounting & Governance, 8.
Nguyen, H. A., & Dang, T. T. G. (2023). Accounting reform and value relevance of financial reporting from non-financial listed firms on the Vietnam stock market. Cogent Business & Management, 10(2), 2220193
Odoemelam, N., Okafor, R. G., & Ofoegbu, N. G. (2019). Effect of international financial reporting standard (IFRS) adoption on earnings value relevance of quoted Nigerian firms. Cogent Business & Management, 6(1), 1643520.
Ohlson, J. A. (1995). Earnings, book values and dividends in equity valuation. Contemporary Accounting Research, 11(2), 661–686.
Paolone, F., Granà, F., Martiniello, L., & Tiscini, R. (2021). Environmental risk indicators disclosure and value relevance: An empirical analysis of Italian listed companies after the implementation of the Legislative Decree 254/2016. Corporate Social Responsibility and Environmental Management, 28(5), 1471-1482.
Pérez, A. (2015). Corporate reputation and CSR reporting to stakeholders: Gaps in the literature and future lines of research. Corporate Communications, 20(1), 11–29.
Reverte, C. (2016). Corporate social responsibility disclosure and market valuation: evidence from Spanish listed firms. Review of Managerial Science, 10, 411-435.
Reverte, C. (2021). Do investors value the voluntary assurance of sustainability information? Evidence from the Spanish stock market. Sustainable Development, 29(5), 793-809.
Rao, K. V., Ibrahim, F., & Tadi, M. S. (2023). Value Relevance of Financial Information: A Comparative Study of Pre- and Post-Implementation of Indian Accounting Standards. Investment Management and Financial Innovations, 20(1).
Roca, F. (2021). The influence of mandatory adoption of IFRS in Argentina on value relevance of accounting information. Journal of Applied Economics, 24(1), 154-172.
Rosli, M. H., Said, J., & Fauzi, N. A. (2017). A brief survey of corporate social responsibility in Malaysia. Selangor Business Review, 2(1), 10–19.
Sadiq, M., Singh, J., Raza, M., & Mohamad, S. (2020). The impact of environmental, social and governance index on firm value: Evidence from Malaysia. International Journal of Energy Economics and Policy, 10(5), 555–562.
Sahlian, D. N., Popa, A. F., Banţa, V. C., Răpan, C. M., & Chiriac, S. C. V. (2023). The Value Relevance of Financial Performance and ESG Scores During Tumultuous Economic Periods. Eastern European Economics, 1-19.
Sun, Y., Sari, N., & Havidz, S. A. H. (2021, April). The impact of IFRS adoption on value relevance accounting information: Evidence from Indonesia. In IOP Conference Series: Earth and Environmental Science, 729(1), 012113. IOP Publishing.
Temiz, H. (2021). The effects of corporate disclosure on firm value and firm performance: Evidence from Turkey. International Journal of Islamic and Middle Eastern Finance and Management, 14(5), 1061–1080.
Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., Adzis, A. A., Ahmad, A. H., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value? Finance Research Letters, 39(2021), 1–7.
Zahid, M., Rahman, H. U., Ali, W., Khan, M., Alharthi, M., Imran Qureshi, M., & Jan, A. (2020). Boardroom gender diversity: Implications for corporate sustainability disclosures in Malaysia. Journal of Cleaner Production, 244, 118683.
Zahid, M., Rahman, H. U., Muneer, S., Butt, B. Z., Isah-Chikaji, A., & Memon, M. A. (2019). Nexus between government initiatives, integrated strategies, internal factors and corporate sustainability practices in Malaysia. Journal of Cleaner Production, 241, 118329.
Published
2024-06-01
How to Cite
HUA SIM, Chia; YUAN FUNG, Chorng; CHING LING, Chui.
Social Disclosure and Accounting Data: Effects on Share Prices in an Emerging Market.
International Journal of Advanced Research in Economics and Finance, [S.l.], v. 6, n. 2, p. 114-128, june 2024.
ISSN 2682-812X.
Available at: <https://myjms.mohe.gov.my/index.php/ijaref/article/view/26834>. Date accessed: 19 may 2025.
Section
English Section
