Impact of Government and Foreign Af?liate In?uence on Corporate Social Reporting in Malaysia

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MAJ 23,4

The impact of government and foreign affiliate influence on corporate social reporting The case of Malaysia
Azlan Amran
School of Management, University Science Malaysia, Penang, Malaysia, and


S. Susela Devi
Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia Abstract
Purpose – This paper seeks to investigate the influence of government and foreign affiliates, particularly; multinational companies on corporate social reporting (CSR) development in an economy, where CSR awareness is low coupled with weak pressure group activism. Design/methodology/approach – This is a cross sectional study that focuses on the information contained in the annual reports for year 2002/2003. This research uses content analysis as method to measure the extent CSR. Findings – Based on regression analysis, the study evidences on the impact of government influence. However, the impact of foreign affiliation variables is not evident. Institutionalisation of the government’s aspirations and commitment to CSR is perhaps the most appropriate description for Malaysian CSR practice. Research limitations/implications – There are two main limitations of this study. Firstly, this study examines the annual reports for one year. Secondly, this study is annual reports centric. It does not examine any other stand alone reports that the respondents might have produced on the subject of society and the environment. Practical implications – This study provides justification for government’s role in promoting CSR practice. The impact is evidenced although there are no direct concerted efforts at that time by the government in respect of CSR policy implementation. The significant role is attributed to the unique Malaysian socio economic structure. Originality/value – This study contributes to the CSR literature particularly in the context of economies where governments play a significant role in promoting economic development. It provides empirical evidence of the influence of government and foreign affiliates. It also adds to the literature by explaining the phenomenon from the Institutional perspective and its relevance to a developing economy. Keywords Corporate social responsibility, Government, Influence, Malaysia Paper type Research paper

Managerial Auditing Journal Vol. 23 No. 4, 2008 pp. 386-404 q Emerald Group Publishing Limited 0268-6902 DOI 10.1108/02686900810864327

Introduction Recent surveys (KPMG, 2002; ACCA, 2002) conducted in relation to corporate social reporting (CSR) practices of Malaysian companies indicate a rising trend in the number of companies that choose to disclose non financial indicators in their annual reports. Of late, this phenomenon is linked to the push for sustainable development. Despite the various reports on this trend (ACCA, 2002; Thompson and Zakaria, 2004), few studies have dwelt on into the underlying factors of such a development, particularly the

impact and role of the government and foreign affiliates[1] (Haniffa and Cooke, 2002; Thompson and Zakaria, 2004; Che Zuriana et al., 2001). It is still unclear as to what really motivates Malaysian companies to disclose social and environmental information, given the low public awareness of such issues and demand for related information (Amran, 2006). Some studies pin the enhanced reporting to the need by Malaysian companies to keep abreast with the latest reporting practices of multi national companies (MNCs) that operate in Malaysia (Zain, 1999; Amran and Susela, 2004) or the foreign affiliates. Studies of companies in more developed countries suggest that corporate image enhancement is the main motivating factor for companies’ adoption of CSR (Neu et al., 1998; O’Dywer, 2002, 2003; Adams, 2002). In all of these studies, however, scant regard is given to the significance of government actions and policies on CSR beyond...
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