Relationship of Change in Corporate Social Disclosure (CSD) on Financial Performance of Plantation Companies in Malaysia
Manasseh, Stephen (2007) Relationship of Change in Corporate Social Disclosure (CSD) on Financial Performance of Plantation Companies in Malaysia. [Dissertation (University of Nottingham only)] (Unpublished)
This study attempts to investigate the relationship between the “change in CSD” that is captured from annual reports of companies and its link to improvements in financial performance using parameters such as Earnings Per Share (EPS), Share Price, PBIT (Profit before Interest and Tax) and Sales Revenue. The focus of this study is on Plantation companies in the KLSE (Kuala Lumpur Stock Exchange) in the Main Board. The Plantation sector has been selected as it is in the “High Profile” category of companies that are considered to already have a high level of CSD in the financial reporting from previous studies. Further the rational for selecting companies only in the KLSE Main Board is that, these are the companies that have been qualified from a size perspective. The significance of this study is that it measures the “change of CSD” and then finds the correlation with financial parameters compared to most previous studies that have done this for the same year of study or used an average value for CSD. This is a critical difference as the “change of CSD” in this study denotes the seriousness of the individual companies to voluntarily use CSD as a strategic tool to increase their competitiveness. Only when we can deduce that using CSD as a strategic tool improves financial performance, then, can we convincingly advise these companies that CSD should be adopted as a strategic tool in their business. If this cannot be proven, then these companies should adopt CSD simply because it is the “right thing to do” (i.e. it is not because by adopting CSD as a strategy, can financial performance be improved). The results indicate that Plantation companies that do report CSD in 2004 had increased their reporting levels in 2005. Further, from the regression analysis, it shows that the change of CSD has a positive relationship with sales and PBIT, however it is not significant. Whereas for Shares and EPS, the relationship is negative yet not significant. My conclusion from this study is that using annual reports as a sole source of indication of the commitment of CSR from the companies, is not practical. Hence further research should measure this change using other means. In order to have a conclusive result, it may be necessary to incorporate both questionnaires to CFO on whether the CSD spending has changed between two consecutive years as well as interviews with key individuals in the organization to establish whether all underlying reasons for the adoption of CSD have been understood and taken into consideration into the “change of CSD” factor. By incorporating the improvements recommended here together with the tool of “change of CSD” as a parameter, I certainly believe the academic world will be closer to providing the corporate world a clear direction to this decade long research area.
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