Competitive disadvantage and segment disclosure: evidence from Malaysian listed companies

• Published in: International journal of commerce and management Vol. 17; no. 1/2; pp. 105 - 124
• Main Authors: Talha, Mohammad, Sallehhuddin, Abdullah, Mohammad, Junaini
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Group Publishing Limited 18.04.2008; Emerald Group Publishing, Ltd
• Subjects: Ability tests; Accounting; Accounting standards; Analysis; Annual reports; Business environment; Competition; Corporate profits; Correlation analysis; Disadvantages; Disclosure; Exposure drafts; Financial disclosure; Financial performance; Financial reporting; Financial statements; Foreign subsidiaries; Hypotheses; Lines of business reporting; Malaysia; Profitability; Profits; Quality standards; Regression analysis; Securities markets; Studies; Malaysia; Accounting standards; Malaysia; Financial reporting; Financial performance; Business environment
• ISSN: 1056-9219; 2059-6014; 1758-8529; 2059-6022
• DOI: 10.1108/10569210710776495

Purpose - This paper seeks to investigate the level of competitive disadvantage experienced by Malaysian listed companies by disclosing segmental information as required by the new accounting standard on segments disclosure by Malaysian Accounting Standards Board.Design methodology approach - A total of 116 Malaysian listed companies are included in the study. Their annual reports for financial year ended 2002 are the main sources. The dependent variable is competitive disadvantage, which is proxied by Total Performance Index. The independent variables are quality of segmental disclosure by employing weighted average correlation technique, size of companies, the use of stricter accounting standard and the choice of business segment or geographical segment as the primary segment. To examine the developed hypotheses of the study; a multivariate least square regression model is employed. The analysis is also supported by correlation technique.Findings - The outcomes of the study indicate that competitive disadvantage exists by disclosing segments information but it is not significant. In addition, larger companies experience greater competitive disadvantage than smaller companies, more extensive segment disclosure standard leads to less competitive disadvantage and the state of competitive disadvantage is greater when geographical segment is disclosed as the primary segment.Research limitations implications - Since the standard allows the reporting companies to disclose their segment information based on internal structure of the organization, the potential existence of materiality judgement may distort the comprehensiveness of the outcome. In addition, the limited number of companies included in the final sample leads to a more cautious approach in generalizing the findings.Practical implications - Since the new accounting standard governing segment disclosure in Malaysian environment took effect in 2002, the study is considered timely. It allows the relevant accounting bodies to continue monitoring the level of compliance among the listed companies towards the new standard and, more importantly, it permits further improvement of the standard given the level of competitive disadvantage that may be experienced by reporting companies.Originality value - The remarkable contribution of the study lies in its timely effort to investigate the potential competitive disadvantage suffered by reporting companies in the first year of the implementation of the new accounting standard governing segment disclosure.