CORPORATE GOVERNANCE MECHANISMS AND VOLUNTARY DISCLOSURE OF STRATEGIC AND FORWARD LOOKING INFORMATION IN ANNUAL REPORTS

Abstract

Strategic and forward looking information (VDSFLI) is important to the stakeholders of the company because it provide strategic plan and future direction of the company. This study aims to examine the relationship between corporate governance mechanisms and VDSFLI. The VDSFLI is measured by using a disclosure index checklist of 36 items. For each item a score is awarded based on the disclosure made by the companies in annual reports. All data is collected from the annual reports of 230 public listed Malaysian companies. The findings of the study revealed that size of audit committee is positively and significantly influence the level of VDSFLI. While the other corporate governance mechanisms are not associated with the level of VDSFLI. The study provides evidence in support of the size of audit committee requirement of Regulatory Framework in Malaysia. This evidence contributes to the argument on the role of audit committee in reducing agency conflict and minimise information asymmetry problem which results in high level of VDSFLI. In addition, the bigger the size of audit committee the better because it would provide positive signal that company has in place an effective governance mechanism as a check and balance which encourage voluntary disclosure practices. It also provides direction to the preparers of the annual report to fully disclose the information voluntarily. This study bridges the gap in the literature of corporate governance by specifically focuses on VDSFLI practices in Malaysia context.