Volume 26 (1)

April 2019

ISSN 0216-423X (Print)

ISSN 2622-2667 (Online)

JOURNALof

ACCOUNTING - BUSINESS & MANAGEMENT

Confidence Crisis in the Application of Cloud Computing in

the Industrial Companies in Jordan a Field Study

Abdullah Mohammed Al-Zoubi and Ibtissam Al-Masaiid

1-20

Comparative Analysis on Corporate Disclosure Practices of Listed

Companies in ASEAN-5 after the Adoption of the Renewal Regional

Disclosure Standards

Nunthapin Chantachaimongkol and Shuwen Chen

21-44

Capital Structure, Ownership Structure and Corporate Governance of

SMEs in Ghana

Ibrahim Anyass Ahmed

45-52

53-62

63-69

The Tax Cuts and Jobs Act and the Middle Class

Deborah Combs and Brian Nichols

The Locus of Innovation: A Literature Review

Yongliang Stanley Han

Journal of Accounting – Business & Management vol. 26 no. 1 (2019) 21-44

Comparative Analysis on Corporate Disclosure Practices of

Listed Companies in ASEAN-5 after the Adoption of

the Renewal Regional Disclosure Standards

*

Nunthapin Chantachaimongkol

†

Shuwen Chen

Abstract

This study aims to assess and compare the extent of corporate disclosure of

the countries that have already implemented the renewal ASEAN disclosure standards

with the countries that have not implemented yet. The empirical result indicates that

overall picture of corporate disclosure in the ASEAN is in a good progression, with an

increasing trend. Then, an independent t-test analysis addresses that the renewal

ASEAN disclosure standards could have an effect on the level of corporate disclosure,

especially in terms of non-financial and strategic information. But, it has no impacts on

financial information. Therefore, it can be concluded that the regional disclosure

standards might be one of the supportive factors for enforcing businesses to disclose

more corporate information to the public. With this finding, it could alert regional

regulators by providing the weaknesses of the current activities related to economic

integration and guiding the direction for further development.

Keywords: corporate disclosure, ASEAN, listed companies, comparative analysis.

I. INTRODUCTION

1

.1. Background

In practice, the problems related to information asymmetry have been one of

the long lasting issues of the countries in the ASEAN (Claessens & Yurtoglu, 2013).

There is a lot of evidences reported that most countries in the ASEAN deemed failure

to disclose accurate information to the public, particularly before the year 1997 (Nam &

Nam, 2004; Krapohl, 2005; and Garcia, 2007). However, after confronted with the

Asian financial crisis, also known as the “Tom Yam Kung” crisis, such trouble had

caused greatly concerned by both public and private organizations. During that period

of time, most countries in the Southeast Asia region, especially the ones where

experienced severe effects like Thailand or Malaysia, had worked actively to reinforce

the capability of national systems, in order to reduce the negative consequences of

the crisis. Yet, they still had tried to harmonize their national rules as well as regulations

with international standards, aiming to attract capital investments from external

sources. Besides reforming the existing mechanisms, they also widely applied various

different applications that could potentially enhance a sustainable development. This

covers a concept of good governance including information disclosure which has been

extensively implemented as a benchmark to determine the basic practices that business

should follow for boosting corporate transparency and accountability within a country.

*

Department of Management and Economics, Dalian University of Technology, Dalian, China.

E-mail: nunthapin@gmail.com.

Department of Management and Economics, Dalian University of Technology, Dalian, China.

†

E-mail: chensw@dlut.edu.cn.

22

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

In this sense, it is unsurprising that policymakers of ASEAN countries have

continuously pay a great attention to enlarge the degree of good governance in both

scope and conditions, reflecting on stronger corporate disclosure requirements

(

Krapohl, 2005). For example, in Thailand, reformation of corporate governance has

been a priority after the financial crisis. It was initially effective and continuously

developed by the National Corporate Governance Committee (NCGC) since 2002. In

the same year, the Stock Exchange of Thailand also set out a mandated guideline,

known as the Principle of Good Corporate Governance, to provide a benchmark for

good practices for listed companies in Thailand. In 2006, it was first revised based on

the Principle of Corporate Governance of the Organization for Economic Cooperation

and Development (OECD) and recommendations in the World Bank’s Reports on the

Observance of Standards and Codes (CG-ROSC). Again, in 2012, it was revised in both

scope and contextual requirements to reinforce the changes in global business

environment and the incoming event of the ASEAN Economic Community (AEC). As

a result, businesses in Thailand were seriously requested to disclose the relevant

information in the right format and announce it at the appropriate time for reaching

good governance (Luengruengtip, 2013). For Malaysia, the corporate governance guide

was first published in the year 2009 by the Bursa Malay to assist the companies listed on

the stock exchange to better understand the listing requirements. Then, in 2011, the

Securities Commission Malaysia (SM) released the action plan, known as the Corporate

Blueprint 2011, to raise the corporate governance standards in Malaysia. Then, in 2012,

a revised version the corporate governance guide was announced to replace the first

edition while the Malaysia Code on Corporate Governance (MCCG) was first

introduced to recommend the direction for enhancing a good corporate culture in an

organization. As aforementioned, it can be noticed that not only substantial rules but

also national regulations in Malaysia have been continuously updated to boost the

efficiency of enforcement (Lim et al., 2013)

In terms of Indonesia, because it also often presented a good evolution in

strengthening the rules and regulations of corporate governance, it could be another

good example for the study of the corporate governance development in Southeast

Asia as well. The document provided by Budidjaja and Dani (2013) reveals that

principle of good corporate governance was first announced in 2006 by the National

Committee on Governance. Then in 2013, Indonesia’s Financial Services Authority

(

Otoritas Jasa Keuangan or OJK) with the International Financial Corporate decided to

create a Corporate Governance Task Force (CGTF) for preparing the corporate

governance roadmap in Indonesia. With this project, various local agencies such as

Indonesia Stock Exchange (IDX), Indonesia Institution of Accountants (IAI), Bank of

Indonesia, and etc. have been called for collaboration to enhance good governance in

the country. Hence, level of business transparency and information disclosure in

Indonesia has been continuously developed with a good progression.

As briefly described above, it is considered that most ASEAN countries were

active for enlarging the degree of good governance in both scope and conditions,

reflecting on stronger corporate disclosure requirements. However, along with this

success, a number of problems related to the directions of development still exist as to

the specifics since they are of quite diverse backgrounds (as concluded in the Table 1)

and often lack good cooperation between member nations.

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

23

Table 1

Differentiation of National Convergences of the Countries in ASEAN

Description

Indonesia

Malaysia

Philippine

Singapore

Thailand

Source

Size (sq.

km.)

1,904,569

329,847

300,000

719.2

513,120

The World

Factbook,

2

017

Number of

Population

260,580,739

(July, 2017

est.)

31,381,992

(July, 2017

est.)

104,256,076

(July, 2017

est.)

5,888,926

(July, 2017

est.)

68,414,135

(July, 2017

est.)

The World

Factbook,

2017

GPD per

Capita

$11,700

(2016 est.)

$27,000

(2016 est.)

$304.9

(2016 est.)

$87,900

(2016 est.)

$407.1

(2016 est.)

Data, 2017

(billion

dollar)

GDP Real

Growth Rate

5%

4.2%

6.9%

2%

3.2%

Data, 2017

(

2016)

Income

Group

Lower Middle

Income

Upper Middle

Income

Lower Middle

Income

High Income Upper

Middle

The World

Factbook,

2017

Income

Stage of

Development Efficiency-

Stage 2

Transition

from Stage 2

to Stage 3

English

Common Law

Transition

from Stage 1 to Innovative

Stage 2

Mixed legal

system of

civil,

Stage 3

Stage 2

Efficiency-

Driven

Civil law

system

with

Schwab,

2015

Driven

Civil Law

system

Driven

English

Common

Law

Legal Origin

Klerman

et al., 2009

common,

Islamic, and

customary

law

common

law

influences

Colonial

Host

Dutch and the

US

Great Britain

Spain and US

Great Britain Never

The World

Factbook,

2

017

Government

Type

Presidential

Republic

Federal

Presidential

Republic

Parliamenta-

ry Republic

Constituti-

onal mo-

narchy

The World

Factbook,

2017

Parliamentary

Constitutional

Monarchy

Ethic Group

Religions

Javanese

Malay 50.1%

Chinese 22.6% 28.1%,

Indigenous

11.8%

Tagalog

Chinese

74.3%

Thai

The World

Factbook,

2017

4

0.1%

Sundanese

5.5%

Malay 3.7%

97.5%,

Burmese

1.3%,

Cebuano

13.1%,

Ilocano 9%,

Malay 13.4%

Indian 9.1%

(Include Sri

Lankan)

Buddhist

33.9%

1

other 1.1%

Muslim 87.2% Muslim 61.3%

Protestant 7%

Catholic 2.9%

Catholic

82.9%,

Muslim 5%,

Evangelical

Buddhist

94.6%,

Muslim

4.3%,

Quality data

on religion

Buddhist

19.8%

Christian 9.2%

Muslim

14.3%

2

.8%

Taoist 11.3% Christian

1

%

Official

Language

Bahasa

Indonesia

Bahasa

Malayu

Filipino

English

Mandarin

English

Thai

(The World

Factbook,

2

017)

- A hierarchi- - A hierarchi- (Hofstede,

National

Culture

- A hierarchi-

cal society

- A hierarchi-

cal society

- A collectivist

society

- A neutral

society

- A Low UAI

societies

- A normative

culture

- A hierarchical

society

- A collectivist

society

- A masculine

Society

- A Low UAI

societies

cal society

- A collect-

ivist society

- A neutral

society

cal society

- A collect-

iveist society

- A feminine

society

2017)

-

A collectivist

society

A feminine

society

A Low UAI

societies

A pragmatic

culture

Restraint

-

- A Low UAI - A high UAI

societies societies

- A

-

- A normative

culture

- Restraint

- A norma-

tive culture

- Not possi-

ble to

pragmatic

culture

-

- Indulgence

-

Not possi-

ble to

determine

Source: collected by the author.

24

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

Prior studies have vividly pointed out that the disclosure practices of ASEAN are

distinct from country to country, and indeed business to business (Craig & Diga, 1998).

For example, regulators in many countries, especially extreme cases like Thailand or

Malaysia, have the intention to create a strong disclosure regime that enables businesses

to be more responsive to their stakeholders and attractive for foreign investments. As a

result of this, numerous documents including international guidelines, best-practices of

developed countries, national regulatory systems, and internal requirements are

harmonized to ensure that the revised policies will cover significant information for

investors and be applicable, whether in the country, region, or global market.

Yet, because various instruments can be applied in policy formation processes,

the disclosure principles in each country are quite unique and sometimes could be

incompatible with others. Furthermore, the literature still believes that, in some

countries, the disclosure rules and regulations are regulated based on their own

direction and experiences. Following this procedure, only domestic demands have been

concentrated while external forces seem to be ignored (Sundgren et al., 2013). As a

result of this, the new setting policies may be separated from the international standard

and they can only be implemented effectively within the respective country. According

to the aforementioned argument, it is generally proven that with a different focus area

of policy settings in ASEAN, national disclosure strategies typically differ from each

other and they would be a big problem to set a new disclosure standard of the region,

inevitably. Furthermore, regarding the ASEAN Corporate Governance Scorecard

Country Reports and Assessment (Teen et al., 2013), the report presented that the

businesses of ASEAN countries often over look disclosing some necessary

information. For example, in Indonesia, the report indicated through an area of

improvement that most listed companies in Indonesia still lacked the information about

the profile of the board members, the information about anti-policies, the information

about employee health and safety, etc. For other countries in the same region, the

situation was quite similar to Indonesia. The report suggests that all of them need to

improve the requested information items that are being disclosed via the company

communication channel such as website, annual report, financial report, etc.

Following this recommendation, it is no doubt that the countries in ASEAN still

lack a good system established to manipulate business practices. By proceeding in these

manners, it is necessary for ASEAN countries to understand the current situation of

corporate disclosure practices and factors within the region.

1

.2. Motivation

Presently, the prospect of regional integration has spurred the countries around

the world to realize the benefits of unity. As a result of this, the countries, neither

developed nor developing, have attempted to collaborate with each other, principally in

terms of economic development. For ASEAN, the member countries have been aware

of the importance of regionalism as well. Hence, in 2003, they have together committed

to enlarge the degree of collaborations by creating the ASEAN Community. Since then,

many projects have been launched to facilitate the members for improving their basic

structure during the transformation processes. For example, in 2013, the renewal of

ASEAN disclosure standards was launched to prepare businesses for the arrival of

cross-listing stock exchange in ASEAN. Nevertheless, the outcomes of this program

was still ignored by the regional standard-setting authorities since there was no official

document assessing on the success or reporting about the progression of each activity.

Based on this weakness, this paper aims to assess and compare the level of corporate

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

25

disclosure between the countries that have already implemented the standards, covering

three countries which are Malaysia, Singapore and Thailand (referred further as the

implemented countries) and the non-implemented countries, consisting of two

countries: Indonesia and the Philippines.

II. THEORETICAL FRAMEWORK

Even though, there are several theories explaining the extent, pattern, and level

of corporate disclosure such as stakeholder theory, legitimacy theory, disclosure theory,

institutional theory, and political economic theory, this study uses the legitimacy theory

to be the theoretical framework of this study. This is because the main aim of ASEAN

corporate disclosure is to serve ASEAN social expectation. The explanation of

legitimacy theory is explained below:

2

.1. Legitimacy Theory

Basically, a concept of legitimacy resides in the theoretical paradigm of

the political economy (Gray et al., 1995; Omran & El-Galfy, 2014). It was designed as a

system-oriented theory to generalize the interaction between an organizational behavior

and a social expectation (Deegan, 2002). As a result of this, it becomes one of the most

popular theories of social and environmental accounting area (Tilling, 2004). However,

although it was widely applied in many empirical works over the last few decades, few

researchers give a description in detail of the term legitimacy explicitly. In response to

this problem, Suchman (1995) clarified its notion by proposing that “legitimacy is a

generalized perception or assumptions of an entity are desirable, proper, or appropriate

within some socially constructed system of norms, values, beliefs, and definitions”.

With this explanation, it can be concluded that legitimacy is not the unitary

phenomenon but it is a symbolic relationship that organizations need to create, whether

voluntarily or reluctantly, to response with the needs of society and be accepted by the

groups (Suchman, 1995). Then, Gray et al. (1995) enlarged a range of knowledge by

addressing that the firms often use the activities of corporate social responsibility,

especially the ones related to environmental perspective, as a tool to reduce the

conflicts with the host community and represent a good image to their stakeholders.

Under this strategy, it is apparent that openly communication by disclosing

relevant corporate information is an important step to acquire a company’s recognition

as well as reliability from the public (Mousa & Hassan, 2015). Supported by a study of

Deegan (2002) which emphasized that there are a variety of simultaneously motivations

contributing managers to report the corporate information such as to comply with legal

obligations, to attract investment funds, to consent with social contracts and industry

requirements, to balance the power of the stakeholders, and so on. From this point of

view, it is obvious that companies normally react with social demands by demonstrating

the satisfied appearances in the corporate media, especially annual reports, in order to

achieve legitimacy from key actors. Furthermore, Mousa and Hassan (2015) addressed

that besides the effects of social pressures, national regulations are also necessary to

stipulate the conditions for businesses. This comprises the features such as what are the

information should be reported, when is the time should be announced, what the

report that such information should be included in, and so forth. Also, Archel et al.

(

2009) sought out that annual reports are the main evidences for elucidating the

convergences of corporate disclosure practices and national workforces. Consequently,

the interplays between state and businesses also potentially reflect in the decisions to

disclose or not disclose information of a company as well.

26

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

As remarked above, it is clarified that a concept of legitimacy is flexible and

powerful to underpin a well-ground theoretical perspective for paving the way for

corporate disclosure harmonization and ensuring its success.

III. LITERATURE REVIEW

3

.1. The Nature of Corporate Disclosure by Country

According to Corporate Governance Disclosure in Emerging Market: Statistical

analysis of legal requirements and company practices (Miller, 2011), the report claimed

that the foundations for good governance of the countries in ASEAN have been

influenced by the International Monetary Fund (IMF), International Reporting

Standard, and mixed-method from the developed countries. However, there are no

direct laws and regulations on corporate disclosure solely enacted in ASEAN. As a

matter of this fact, the disclosure rules of each country have been concealed in

abounding different documents as illustrated below:

3

.1.1. Indonesia

Regarding Report on the Observance of Standards and Codes (ROSC):

Corporate Governance Country Assessment for Indonesia (Robinett & Berg, 2010), it

is clear that national corporate disclosure framework of Indonesia has been shaped

based on many legal sources are concluded in Table 2.

Table 2

Laws and Regulations Related to Corporate Disclosure in Indonesia

Laws and

Regulations

The Year of

Announcement Enforcement

Type of

Regulatory

Authorities

Undang-Undang Pasar

Modal (Law No.8 of 1995

on Capital Market)

1995

Mandatory

Requirement

The President of the

Republic of Indonesia

Regulation Number I-A

Listing Requirements

Regulation Number I-E

Concerning the Obligation

of Information Submission

Indonesia’s Code of Good

Corporate Governance

2004, as amend-

ed in 2014

2004

Mandatory

Requirement

Mandatory

Indonesia Stock

Exchange

Indonesia Stock

Exchange

Requirement

2006

Voluntary

Requirement

The National

Committee on

Corporate

Governance (NCCG)

The Minister of Law

and Human Rights

The Company Law

2007

2012

2014

Mandatory

Requirement

(

2

The Law Number 40 of

007)

Bapepam-LK Rules

VIII.G.7)

Mandatory

Requirement

Capital Market and

Financial Institution

Supervisory Agency

Indonesia Financial

Service Authority

(

Indonesia Corporate

Governance Manual

Recommendat-

ion

(

OJK), International

Financial Corporation

IFC)

(

Source: collected by the author.

3

.1.2. Malaysia

As an Islamic country, Malaysia often provides strong and effective enforcement

regimes to monitor business transparency and accountability. Nevertheless, it is

noticeable that in term of corporate disclosure requirements, Malaysia still lacks a single

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

27

platform to enhance the practices of a business. Alternatively, abounding references are

applied to robust reporting standards as detailed in Table 3.

Table 3

Laws and Regulations Related to Corporate Disclosure in Malaysia

Laws and

Regulations

The Year of

Announcement

Type of

Enforcement

Regulatory

Authorities

Banking and

Financial Institution

Act (Act 372)

Securities

Commission Act

1989

Mandatory

Requirement

The Central Bank of

Malaysia

(Bank Negara)

Securities Commission

Malaysia

1993, as amend-

ed in 2015

Mandatory

Requirement

(

Act 498)

1

997

Mandatory

Requirement

The Malaysian Accounting

Standard Board; The

Securities Commission

Malaysia

Financial Reporting

Act

Development

Financial Institution

Act

2002

Mandatory

Requirement

Capital Market and

Services Act (Act

2007, as amend-

ed in 2012

Mandatory

Requirements

Securities Commission

Malaysia

671)

Malaysian Code on

Corporate

Governance

The Malaysia

Corporate

2012

Voluntary

Requirements

Securities Commission

Malaysia

Mandatory

Requirement

Securities Commission

Malaysia

Governance

Blueprint

Islamic Financial

Service Act

The Bursa Malaysia

Corporate Disclosure

Guideline

2013

Mandatory

Requirement

Recommendation

The Central Bank of

Malaysia (Bank Negara)

Bursa Malaysia (KLSE)

Companies Act (Act

2016

Mandatory

Requirement

Mandatory

Securities Commission

Malaysia

Bursa Malaysia (KLSE)

777)

Bursa Malaysia

Listing Requirement

Requirement

(

Chapter 9&15)

Source: collected by the author.

3

.1.3. The Philippines

Since 1998, the Philippines has been forced by the international organizations to

more concern the issues related to information asymmetry. As a result of this, the

national legal system has been in the reinforcement programs to ensure that they will

effective enough to monitor the business activities. For better understanding, some

principles related to corporate disclosure that has been widely included in the national

laws and regulations are summarized in the Table 4.

Insert Table 4 here.

3

.1.4. Singapore

In Singapore, although it has been widely recognized as the most effective

country of Asia in promoting good governance, the regulation of disclosure standards

still reflects a diversity of legal heritages as exhibited in Table 5.

28

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

Table 4

Laws and Regulations Related to Corporate Disclosure in the Philippines

Laws and

Regulations

The Year of

Announcement Enforcement

Type of

Regulatory

Authorities

The Corporate Code

of the Philippines

The Revised

1980

1982

2000

2004

009, as

Mandatory

Requirement Commission

Mandatory

Securities and Exchange

Securities Act

Requirement Commission

Securities and Exchange

Requirement Commission

The Securities

Regulation Code

Financial Disclosure

Checklist

Mandatory

Securities and Exchange

Requirement Commission

Securities and Exchange

Requirement Commission

2

Mandatory

The Revised Code of

Corporate Governance

amended in

2015

Philippines Listing

and Disclosure Rules

Securities and

Exchange

2013

Mandatory

Requirement

Mandatory

Philippines Stock Exchange

Securities and Exchange

Various

Requirement Commission

Commission

Memorandum

Source: collected by the author.

Table 5

Laws and Regulations Related to Corporate Disclosure in Singapore

Laws and

Regulations

The Year of

Announcement Enforcement

Type of

Regulatory

Authorities

SGX’s Corporate

Disclosure Policy

2002

Mandatory

Requirement

Singapore Stock Exchange

(

Appendix 7.1)

Companies

Accounting

2004

(Revised

Mandatory

Requirement

Accounting Standards

Council Singapore

(

Standards)

Edition)

Regulations

The Companies Act

2006

(Revised

Edition)

2006

(Revised

Edition)

2011, as

amended in

2017

Mandatory

Requirement

Singapore Government

Singapore Stock Exchange

(

Chapter 50)

The Securities and

Futures Act (Chapter

Mandatory

Requirement

289)

The Singapore

Mandatory

Requirement

Exchange Listing

Rules (Chapter 12)

Singapore Code of

Corporate Governance

2012

Mandatory

Requirement

Monetary Authority of

Singapore (MAS) and

Singapore Stock Exchange

Source: collected by the author.

3

.1.5. Thailand

In Thailand, it is evident that a large number of rules are applied as references to

determine the disclosure practices of a company. The details of some important

provisions are illustrated below:

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

29

Table 6

Laws and Regulations Related to Corporate Disclosure in Thailand

Laws and

Regulations

The Year of

Announcement

Type of

Enforcement

Regulatory

Authorities

The Thai Civil and

Commercial Code

1925, as

amended up to

No. 20 in 2014

1992, as

amended up to

No.3 in 2008

1992, as

Mandatory

Requirement

Ministry of Commerce

The Public Limited

Companies Act (the

PLC Act)

The Securities and

Exchange Act (the

SEA)

Mandatory

Requirement

Ministry of Commerce

Mandatory

Requirement

Securities and Exchange

Commission

amended up to

No.4 in 2008

Stock Exchange of

Thailand

Guidelines on

Disclosure of

1993

Mandatory

Requirement

Stock Exchange of

Thailand

Information of

Listed Companies

Rules, Conditions

and Procedures of

Information

Disclosure for a

Listed Company

The Best Practice

Guideline for Audit

Committees’

1992, as

amended up to

No.3 in 1995

Mandatory

Requirement

Securities and Exchange

Commission

Stock Exchange of

Thailand

1999

Voluntary

Requirement

Stock Exchange of

Thailand

The Code of Best

Practices for

Voluntary

Requirement

Stock Exchange of

Thailand

Directors of Listed

Companies

The Accounting Act

2000

Mandatory

Requirement

Comply or

Explain

Ministry of Commerce

The Principles of

Good Corporate

Governance for

2002, as

amended up to

No. 2 in 2012

Stock Exchange of

Thailand

Listed Companies

Thai Accounting

Standards (TAS) and

Thai Financial

2004, as

amended in

2016

Mandatory

Requirement

Federation of Accounting

Professions

Reporting Standards

(

TFRS)

Disclosure Manual

2007

2009

Recommendation

Stock Exchange of

Thailand

Stock Exchange of

Thailand (SET)

The Listed

Companies

Handbook

Mandatory

Requirement

Source: collected by the author.

As presented in the above tables, it can be summarized that the regulatory

framework of corporate disclosure in ASEAN has been shaped based not only

mandatory requirements but also voluntary conditions, covering four main legal

sources: company law, financial market law, securities regulations, and corporate

governance code. Additionally, it is found that since the first enactment, the national

30

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

regulatory frameworks as well as disclosure standards have been constantly magnified in

both scope and intensity, especially after the Tom Yam Kung crisis.

3

.2. Economic Integration

After the end of the Second World War, the world was moving into the

transitional period, which has been often conceptualized as the rebirth of globalization.

The influences of this phenomenon have bought forward major shifts in the world

economic system, with the so-called “Globalization of the world economy” or

“

Economic Globalization” (Anderson, 2001). As the influences of a concept of

borderless, the business environment is intensively complicated whereas the

competitors are more increasing. Then, the integrated world economy has been

introduced to deal with the rapid changes and uncertainty in business situation; improve

the level of negotiation as well as bargaining capacity; and boost the power of

competitiveness. The collaborations among the countries or the regions are well

enhanced for managing strong relationships across boundaries. (Balassa, 1961;

Hartzenberg, 2011; and Rodrigue et al., 2013). However, according to the economic

integration theory, the processes of amalgamation are various depending on the level of

complexities as shown in Figure 1.

Figure 1

The Different Levels of Economic Integration

Political

Union

Common

Government

Econo-

mic

Union

Common currency, harmonized tax rates,

common monetary and fiscal policy: EU

(partial)

Common

Market

Factors of production move freely

between members

Customs

Union

Common external tariffs

Free

Trade

Free trade between members: NAFTA,

Mercosur, ASEAN (partial)

Complexity

Source: Rodrigue et al., 2013

Figure 1 shows that the conditions and ties of relationships start from a very

loose environment, where the countries can make any agreements under the definite

conditions such as to reduce or eliminate tariff barriers, to coordinate monetary and

fiscal policy, to provide free trade areas, to implement economic standards and so on.

Then, the degrees of integration are continuously tightened up until the common

government where the member countries are completely combined as a single market

(

Burfisher, 2004; Bach, 2016). With the complexity of economic arrangements, it is

obvious that the status of significant membership obligations around the world vary on

the different stages. In effect, many groups have concentrated on very loose

environments which are preferential trade agreements, free trade area, and customs

unions. All of them have contributed open-up trade liberalizations with the wide range

of low tariffs, the reduction or elimination of trade barriers, and the other benefit-

sharing on trading system to support the increasing pressures of international trades

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

31

(

Schott, 2008; Cheng & Duval, 2014). Along with this kind of relationship, a number of

international institutions, for instance, the World Bank, International Monetary Fund

IMF), and the World Trade Organization (WTO) were created as the fundamental

(

organizations in promoting and managing multilateral trade negotiations. At the same

time, a common set of multilateral trade rules like the General Agreement onariffs and

Trade (GATT), succeeded in 1995 by the WTO was adopted as a basic working

framework in the global trade (Jara, 2008). Later on, numerous substantive

commitments were signed up with the different conditions; depending on the objective

of establishment and the deepening of connectivity; normally ranging from preferential

trade agreements (PTAs) to Free Trade Areas (FTAs), Customs Unions (CUs),

Common Markets (CMs), Economic and Monetary Unions (EUs), and Political Unions

(

PUs) (Balassa, 1961; Ascani et al., 2012; and Rodrigue et al., 2013).

3

.3. ASEAN Economic Community

In practice, the ASEAN Economic Community (AEC) is one of the

transforming processes for the community-building. It is created aiming to build a

strong economic foundation, accelerate regional economic growth, create a competitive

market based on four expectations -- a single market and production base; a highly

regional economic competition; an equitable regional economic development; and a

fully integration of regional economic into the globalized world -- and bolster up the

performance of regional cooperation. These including human resources development

and capacity building; recognition of professional qualifications; close consultation on

macroeconomic and financial policies; trade financing measures; enhanced

infrastructure and communications connectivity; development of electronic

transactions through e-ASEAN; integrating industries across the region to promote

regional sourcing; freeing up the flow of services, investment, and skilled labors;

allowing freer movement of capital; and enhancing private sector involvement for the

building of the AEC (Kawai et al., 2008; Association of Southeast Asian Nations, 2003;

and Association of Southeast Asian Nations, 2009).

Following its goals, it could significantly reflect in tariff reduction; better customs

procedures; further liberalization of trade in goods and service; the ease of movement

in term of investment, capital, and skilled labor around the region. Thus, when the

AEC came into effect at the end of 2015, the members will automatically gain both

advantages and disadvantages of its commitments in which challenge directly on

business activities such as creating a new way of coordinating supply chains; expanding

in investments; more dynamic and competitive with new mechanisms; achieving in

internationalization of industrial standards especially in the priority sectors; and

enhancing on bilateral trade as well as negotiation at the global level.

3

.4. The Roles of the AEC on Corporate Disclosure in ASEAN

Initially, the concept of good governance was not included in the AEC 2015

blueprint. However, since the ASEAN countries need to attract the long-term

investments into the region by integrating their capital markets together, business

transparency has become one of the most important factors in success.

Insert Figure 2 here.

As seen in the Figure 2, it is shown that the ASEAN Disclosure Standards was

introduced under the ASEAN Capital Market Forum (ACMF) Implementation Plan for

the development of an integrated capital market in 2011. The ASEAN Disclosure

Standards is a set of requirements that were designed by the ASEAN Capital Market

Forum (ACMF) to promote good practices within the region; create flavor cultures for

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Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

businesses in the ASEAN; raise corporate governance standards of the member

countries; facilitate cross-border investing opportunities within the ASEAN capital

market, particularly in terms of the growth in capital flows across borders; and increase

in long-term investments from external sources. In 2009, the Scheme was first

announced as the two levels of standards, namely the ASEAN Disclosure standards

and the Plus Standards.

Figure 2

Main Activities of the Asean Economic Community

Source: ASEAN Investment Report 2015 (2015).

The ASEAN Disclosure Standards was introduced based on the standards on

cross-border offering set by the International Organizational Organization of Securities

Commissions (IOSCO), the accounting and auditing standards of the International

Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA). It

aims to harmonize cross-listing rules in multiple regulatory systems by removing the

regulatory obstacles as well as the restrictive national measures of the ASEAN

members and replacing with the common disclosure standards. On the other hand, the

Plus standards are the supplementary principles of each participating members in order

to retain some specific features of market practices, national laws or regulations. In

accordance with a better equality in legal framework, the renewal version of the

ASEAN Disclosure Standards was adopted to replace the initial one in 2013. Under the

new Scheme, the Plus standards are eliminated while some significant elements such as

forward looking statement or pro forma financial information are attached into the

application. As a result of this development, there is the one single set of disclosure

standards available for all ASEAN members to comply with. However, now, only three

countries, namely Malaysia, Singapore and Thailand, have implemented the Scheme

into the national rules of the respective jurisdictions. (Association of Southeast Asian

Nations, 2009; Association of Southeast Asian Nations, 2013; Monetary Authority of

Singapore, 2015; and Wan, 2017).

IV. HYPOTHESIS DEVELOPMENT

Based on legitimacy theory, it contends that environmental factors could have

influences on accounting system as well as disclosure practices across country. This

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

33

includes not only internal but also external variables such as a demand for information

of stakeholders, an influence of globalization, an advancement of technological

innovation, an increasing of international trade and investments agreement, a global

harmonization of accounting standards and so on (Choi, 1973 ; Thomas, 1986 ; Garcia,

2

007; Chuanrommanee & Swierczek, 2007; Bauwhede & Willekens, 2008; Bokpin,

013; Kittiakrastein & Srijunpetch, 2013; Sundgren et al., 2013; and Aksu & Espahbodi,

016). In accordance with aforementioned, there are a number of empirical evidences

convincing that the adoption of stronger standards could help to develop and stimulate

better businesses practices, reflecting on the greater transparency. For example, the

finding of Li (2011) claims that after IFRS adoption in 2007, 45% of Chinese firms

improved their quality of information disclosure in the 2010 annual report. With this

finding, it potentially offers a new insight to legitimacy theory by emphasizing that a

function of national mechanism can induce businesses to change their behaviors.

To encourage this obvious point, Bokpin (2013) reaffirmed this linkage by

pointing out that the adoptions of the IFRS and IAS have marginally improved the

level of corporate disclosure practices of the listed companies in Ghana. Together with

a study conducted in Romania, the result also mirrored the perception of legitimacy

theory through the fact that the level of corporate governance of Romanian BSE listed

companies can be developed after the adoption of the international principles.

Therefore, the degree of regulatory enforcement is related to corporate disclosure

practices (Achim & Borlea, 2014). Furthermore, according to a study of Leuz and

Verrecchia (2000) on the economic consequences of increased disclosure, the finding

still increases the reliability of legitimacy framework by illustrating that the adoption of

international reporting requirements of the German firms results to an increase in the

level of corporate disclosure, reflecting on an improvement in trade volume and a

decrease in information asymmetry. In the ASEAN context, Kittiakrastein and

Srijunpetch (2013) found that the level of earnings smoothing among 6 countries in the

ASEAN which are Indonesia, Malaysia, the Philippines, Singapore, Thailand, and

Vietnam increased after the declaration of the AEC establishment which indicates less

comparable. However, the overall level of earnings management towards targets

decreased, which implies that the accounting quality improved after the declaration

while the level of timely loss recognition is not significantly changed after the

declaration. As a matter of this finding, it is plausible to believe, along with legitimacy

theory, that external pressures could be significantly associated with business activities.

By the above logic, it can be implied that the adoption of the renewal regional

disclosure standards could have an influence on the level of disclosure practices in the

ASEAN. Hence, to extend the range of the theoretical tool and increase a better

understanding on the topic, the following is hypothesized:

H

1

: the level of corporate disclosure of the countries that have already implemented the

renewal ASEAN disclosure standards will be higher than the non-implemented

countries

1a: the level of financial information disclosure of the countries that have already

implemented the renewal ASEAN disclosure standards will be higher than the

non-implemented

1b: the level of non-financial information disclosure of the countries that have already

implemented the renewal ASEAN disclosure standards will be higher than the

non-implemented

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H

1c: the level of strategic information disclosure of the countries that have already

implemented the renewal ASEAN disclosure standards will be higher than the

non-implemented

V. RESEARCH METHODOLOGY

.1. Sample

The sample used in this study is drawn from the top 50 of best corporate

5

governance companies of 2014 in five ASEAN countries. Nonetheless, because the

activities including disclosure rules of the bank and insurance industry are not quite

comparable with the others, they were automatically excluded from the list. Then, the

remainder samplings were selected based on the following criteria:

1

) The annual reports including other relevant documents must be available in English

version on the website of the company, the website of the Stock exchange of each

country, or the DataStream International (Thomson Reuters) database over the

period of the study

2

) The firms must have been listed on one of the Stock Exchange of five ASEAN

countries during the study period

The final sample covers 111 listed companies. It consists of 22 firms from

communications sector, accounted for 19.82%; 11 firms from consumer discretionary

sector, accounted for 9.91%; 22 firms from consumer staples sector, accounted for

1

9.82%; 21 firms from energy sector, accounted for 18.92%; 21 firms from industrials

sector, accounted for 18.92%; and 14 firms from the utility sector, accounted for

1

2.61%.

5

.2. Data Collection

To collect the data, the annual report of the year 2014 and 2015 are used as

primary information sources. However, other relevant sources of information such as

company’s website, financial reports, corporate governance reports, corporate social

responsibility report, and among other could be applied if necessary.

Furthermore, since this study is carried out based on the perspective of outsiders

who normally obtain corporate information through the public channels only, all

documents are downloaded from the website of the company, the website of the Stock

exchange of each country, or the DataStream International (Thomson Reuters).

5

.3. ASEAN Disclosure Index

This study used a self-constructed research instrument, namely the ASEAN

Disclosure Index, to assess the extent of corporate disclosure in the ASEAN through

the annual reports and other company filings such as financial reports, corporate

governance reports, and corporate social responsibility reports. It is developed based on

the requirements of the renewal ASEAN disclosure standards, consisting of 212

information items, with three attributes: financial information (76 items), non-financial

information (68 items) and strategic information (68 items).

To evaluate the level of disclosure practices in the ASEAN, 1 code is assigned to

every information item that were expressed on the company’s documents and 0 if

otherwise. Then, the total disclosure score is calculated by summing the value of each

information category and converted to the ratio of the actual scores that were awarded

to a company when requested information was disclosed to the total scores that are

expected to earn. The formula of aforementioned index is given as follows:

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

35

ASEAN Disclosure Index (ADI)=

Where:

1

) ASEAN Disclosure Index (ADI) = the ratio of the actual scores that were awarded to a

company when requested information was disclosed to the total scores that are expected to

earn. It is ranged from 0 to 1, meaning that if a firm disclosed all 212 items of information, it

would receive a score of 1, accounting for 100%,

2

3

) n= the total number of items that could be disclosed, where n ≤ 212, and

) di= the actual value that was awarded to a company when the requested information is

disclosed (assigned as 1 if the item di is disclosed; and 0 otherwise).

5

.4. Analytical Tool

To test the hypothesis, average disclosure scores are prepared into two groups.

The first group covers firms from the countries that have already implemented the

renewal ASEAN disclosure standards (referred further as the implemented countries),

consisting three countries which are Malaysia, Singapore and Thailand. The second

group contains from the countries that have not implemented the regional disclosure

standards yet (referred further as the non-implemented countries), covering two

countries: Indonesia and Philippines. Then, an independence t-tests technique is

applied as a statistical tool for testing the differences between average means of

disclosure scores between two parameters. Based on this theory, it is suggested that to

estimate the relationships in a single direction, the variables are measured with the

degree of freedom and sig (one-tail) at significant level 0.05. If one-tailed p-value is less

than 0.05, the null hypothesis will be rejected and the alternative hypothesis will be

accepted (Shier, 2004; Bruin, J., 2006)

VI. FINDINGS

6

.1. Descriptive Analysis

The descriptive statistics provide an overview of the data obtained from the

investigation through the annual reports of the year 2014 and 2015 with the ASEAN

disclosure index.

Insert Table 7 here

Table 7 shows an average of corporate disclosure score, standard deviation,

minimum score and maximum score of the implemented countries and the non-

implemented countries in three dimensions: the year 2014, the year 2015 and the two-

year average. Overall, the empirical evidence shows that an average disclosure score of

the implemented countries was at 59.8% in 2014 and slightly increased to 60.0% in

2

015. Also, an average disclosure score of the non-implemented countries was at 55.9%

in 2014 and moved up to 56.9% in 2015. With these findings, it is obvious that the level

of corporate disclosure practices of both groups is at a moderate level, with an average

5

9.9% for the implemented countries and 56.4% for the non-implemented countries.

However, the movement was in a good direction, with an increasing trend.

Besides, the evidence also reveals that an average disclosure score of the

implemented counties is slightly higher than the non-implemented countries, accounted

for 3.9% in 2014, 3.1% in 2015, and 3.5% for the two-year average. This result suggests

that the countries that provide strong regulations would require more information to be

disclosed, resulting in better outcomes. To be more specific, it appears that this trend is

consistent with the strategic information disclosure score. The table indicates that the

two-year average disclosure score of strategic information of the implemented countries

was at 58.0%, with a rate of 57.4% for 2014 and 58.5% for 2015. Together, the two-

36

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37

year average disclosure score of strategic information of the non-implemented

countries was at 51.9%, with a rate of 51.3% for 2014 and 52.5% for 2015. According

to the results, it can be concluded that firms from both groups tend to disclose more

strategic information to the public, with a rate of 1.1% for the implemented countries

and 1.2% for the non-implemented countries. Furthermore, overall extent of strategic

information disclosure of the implemented countries was higher than the non-

implemented countries, which was 6.1% for 2014, 6% for 2015 and 6.1% for the two-

year average.

Similarly, in terms of non-financial information disclosure, the table shows that

an average non-financial information disclosure score of the implemented countries

was stable at a rate of 61.7% over two years while an average score of the non-

implemented countries was little developed from 57.3% in 2014 to 58.5% in 2015,

accounted for 1.2% of the difference between two years. However, overall extent of

non-financial information disclosure of the implemented countries was still higher than

the non-implemented countries, accounted for 4.4% in 2014 and 3.2% in 2015, being

3

.8% for the two-year average. Another notable result from the survey is that the level

of financial information disclosure of the implemented countries was decreased from

0.3% in 2014 to 59.8% in 2015, obtained the estimated difference of 0.5%.

6

Conversely, the movement of financial information disclosure of the non-implemented

countries was in an increasing trend, with an average of 58.9% in 2014 and 59.3% in

2

015. Yet, the overall picture of financial information disclosure between two groups is

still in the same line with the overall picture and other types of information. The table

indicates that the two-year average of the implemented countries was still higher than

the non-implemented countries, accounted for 1.4% in 2014 and dropped to 0.5% in

2

015, being only 1% for two-year period. In relation to this matter, it can be pointed

out that a strong condition in the financial information requirements might not be

effective for enhancing business to disclose financial information even if it is a

mandatory requirement.

6

.2. Independent T-Test Analysis

To investigate the differences in corporate disclosure practices between the

implemented countries and the non-implemented countries, an independent t-test

analysis is performed in three difference cases: the year 2014, the year 2015 and the

two-year average. In each case, the results are provided in four aspects as presented in

the table below:

Table 8

The Result of Independent T-Test Estimation

6

.2.1. Overall Extent of Corporate Disclosure

According to the table9, the evidence shows that there was a significant

difference in an overall average of disclosure score for the implemented countries

M= 0.598, SD= 0.051 for the year 2014; M= 0.600, SD= 0.061 for the year 2015; and

M= 0.599, SD= 0.052 for the two-year average;) and the non-implemented countries

(

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Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

(

M= 0.559, SD= 0.70 for the year 2014; M= 0.569, SD= 0.067 for the year 2015; and

M= 0.564, SD= 0.067 for the two-year average), conditions; t(109)= 3.385, p= 0.005

for the year 2014; t(109)= 2,568, p= 0.006 for the year 2015; and t(220)= 3.119,

p= 0.010 for the two-year average. With this finding, the first hypothesis which is

the level of corporate disclosure of the countries that have already implemented the

renewal ASEAN disclosure standards will be higher than the non-implemented

countries is accepted. The result suggests that the adoption of the renewal ASEAN

disclosure standards could enhance the level of corporate disclosure in ASEAN.

6

.2.2. Financial Information Disclosure

With respect to the table9, the finding suggests that there was no significant

difference in financial information disclosure between the implemented countries

M= 0.603, SD= 0.071 for the year 2014; M= 0.598, SD= 0.079 for the year 2015; and

M= 0.601, SD= 0.071 for the two-year average) and the non-implemented countries

M= 0.589, SD= 0.704 for the year 2014; M= 0.593, SD= 0.079 for the year 2015; and

(

M= 0.591, SD= 0.074 for the two-year average), conditions; t(109)= 0.938, p= 0.175

for the year 2014; t(109)= 0.366, p= 0.358 for the year 2015; and t(220)= 0.677,

p= 0.250 for the two-year average. With this finding, the level of financial information

disclosure of the countries that have already implemented the Renewal ASEAN

Disclosure Standards will be higher than the non-implemented countries is rejected.

The result recommends that the adoption of the renewal ASEAN disclosure standards

provides a less effective for the improvement of financial information disclosure

practices in ASEAN, neither the implemented nor the non-implemented countries.

6

.2.3. Non-Financial Information Disclosure

Based on the above table, the result indicates that an average of non-financial

information disclosure of the implemented countries M= 0.617, SD= 0.078 for the year

014; M= 0.617, SD= 0.075 for the year 2015; and M= 0.617, SD= 0.070 for the two-

2

year average) is significantly higher than the non-implemented countries (M= 0.573,

SD= 0.084 for the year 2014; M= 0.585, SD= 0.088 for the year 2015; and M= 0.579,

SD= 0.080 for the two-year average), conditions; t(109)= 2.833, p= 0.025 for the year

2

014; t(109)= 2.080, p= 0.020 for the year 2015; and t(220)= 2.663, p= 0.004 for the

two-year average. In regard to this result, the level of non-financial information

disclosure of the countries that have already implemented the renewal ASEAN

disclosure standards will be higher than the non-implemented countries is accepted.

The result advocates that the adoption of the renewal regional disclosure standards has

a strong relationship with the extent of corporate disclosure in ASEAN.

6

.2.4. Strategic Information Disclosure

Referred to the table above, an analysis demonstrates that over the period of the

study, the implemented countries always had higher disclosure scores (M= 0.574,

SD= 0.628 for the year 2014; M= 0.585, SD= 0.077 for the year 2015; and M= 0.580,

SD= 0.063 for the two-year average) than the non-implemented countries (M= 0.513,

SD= 0.109 for the year 2014; M= 0.525, SD= 0.112 for the year 2015; and M= 0.519,

SD= 0.108 for the two-year average), conditions; t(109)= 3.795, p= 0.000 for the year

2

014; t(109)= 3.337, p= 0.000 for the year 2015; and t(220)= 3.763, p= 0.000 for the

two-year average. With this finding, the sub-hypothesis which is the level of strategic

information disclosure of the countries that have already implemented the renewal

ASEAN disclosure standards will be higher than the non-implemented countries is

accepted. As a result of this, it can be concluded that the adoption of the renewal

ASEAN disclosure standards could influence on strategic information disclosure of

businesses in Southeast Asia.

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

39

VII. ANALYSIS AND DISCUSSION

This study aims to assess and compare the level of corporate disclosure after the

adoption of the renewal disclosure standards between the implemented countries and

the non-implemented countries. The finding reveals that the countries that have already

implemented the renewal disclosure standards in their national regulation provide a

higher level of corporate disclosure over the period of the study, whether in the specific

year or the two-year average. To be more specific, the result reveals that businesses

from the implemented countries would more disclosure the non-financial information

and strategic information in their annual reports, comparing with the non-implemented

countries. However, in terms of financial information, the finding suggests that there is

no significant difference in practices between two groups. Based on this viewpoint, it

can be accurately reconsidered by Ho and Taylor (2013) who endorse that the countries

in ASEAN like Malaysia were adopted a higher quality accounting standards such as the

International Financial Reporting Standards, leading to a higher level of voluntary

disclosure. Furthermore, Ghani and Tarmezi (2016) posited that the overall level of

information disclosure among Malaysia public listed companies is at a good level, with

slightly increasing year by year because of the effect of corporate disclosure guidelines.

This argument can be supported by the study of Kittakrastein and Srijunpetch (2013)

which verified that the accounting quality in ASEAN countries improved after the

declaration of AEC. In addition, such improvement was also discovered in the parallel

movement of the European countries.

Based on the study of Choi (1973) on financial disclosure and entry to the

European capital market, it suggests that since an international setting often requires

stronger demand on information, the financial disclosure practices of the firms in

Europe significantly improved after they enter into the European capital market.

Besides, the findings of this study is also consistent with a notion of legitimacy theory

which mentions that an external pressure including the global trend as well as the

revolution of regional connectivity as one of the key factors encouraging businesses to

disclose the other types of information besides financial reporting. It is relevant to

highlight that, companies in ASEAN tend to publicize more information related to

business strategy and non-financial activities because they need to facilitate

communication with the stakeholders and map out appropriate directions to ensure

that the needs of each partner will be fulfilled at the relevant time. Furthermore, in a

dynamic society where is constantly open for the changes, businesses need to be

adaptive, flexible and cooperative with the environments internally and externally.

Consequently, after the adoption of the renewal ASEAN disclosure standards, the

traditional business model of the implemented countries has been directly challenged by

the new coming event immediately. With respect to this circumstance, stronger

requirements have been adopted to serve with the conditions of economic integration.

Businesses, then, are necessary to interact vigorously with the shifts in policies and

practices. They have no alternative choices except complying with new regulations and

satisfying the demands of their networks. Hence, since the topic related to good

governance has become an important subject of a global trend, it is no doubt that

ASEAN countries has also included this concerning in the Master Plan on ASEAN

Connectivity. In line with this matter, businesses in ASEAN have been requested to

disclose more corporate information, especially in terms of non-financial and strategic

performance.

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To support this statement, the IMF working paper on corporate governance

quality: trends and real effects (Nicolo et al., 2006) indicated that corporate governance

quality of non-financial firm in Asian countries was improved with a large number on

average during the 1994-2003 period and improvements have been largely observed

through the perspective of transparency. Together with a cross-country study of Craig

and Diga (1998) which endeavored to examine the nature and extent of corporate

disclosures in ASEAN states. Their results showed that the actual disclosure practices

of businesses in ASEAN were not largely different. In terms of financial information

disclosure, the disclosure level was rather low throughout the region whereas the

qualities of non-financial and social information disclosure were at acceptable levels.

Following these findings, it can be reflected a specific feature of legitimacy theory

which recommends that since the disclosure framework of ASEAN corporations has

been continuously improved in accordance with social environmental requirements, the

level of corporate disclosure in ASEAN has been raised as well. Yet, the evidences still

demonstrated that the movement of financial information disclosure would be less than

the others because businesses need to response with the social environmental

requirements. Therefore, businesses will disclose more the information in other

categories besides financial statement, in order to receive the acceptance from their

stakeholders, in return.

In summary, it can be finalized that the regional disclosure standards could help

to enhance businesses to disclose more the information to the public, especially in

terms of non-financial information and strategic information. But, it provides less

effective in a case of financial information. Based on this evidence, it could definitely be

an important clue to enlarge the extent of legitimacy theory by marking the positive

relationship between policy harmonization and business practices. Thereby, it could be

acknowledged that when the regional standards have been enforced, businesses would

adjust their operations and structures in response to new environments, resulting in

better performance in organizational management.

VIII. CONCLUSION, LIMITATION AND FUTURE RESEARCH

8

.1. Conclusion

This study aims to assess and compare the level of disclosure practices of the

countries that have already implemented the renewal ASEAN disclosure standards with

the non-implemented countries. The empirical results indicated that the overall picture

of corporate disclosure in the ASEAN is in a good progression, with an increasing

trend. Furthermore, based on an independent t-test analysis, it claims that the renewal

ASEAN disclosure standards could have an impact on the level of corporate disclosure

practice, especially in terms of non-financial information and strategic information, but

it has no impacts on financial information disclosure practices. Therefore, it can be

concluded that the current regional economic activity might be one of the supportive

factors for enforcing businesses to disclosure more corporate information to the public.

With this finding, it could alert regional regulators by providing the weaknesses of the

current regional economic integration on financial information disclosure; enhancing

the awareness of the issues related to information asymmetry and guiding the direction

for further development. Hence, the regional administration should be more active in

promoting the new standards of corporate disclosure and constantly improving its

quality, with appropriate directions.

Chantachaimongkol and Chen/Journal of Accounting – Business & Management vol. 26 no. 1 (2019)

41

8

.2. Limitation and Area for Future Research

This study attempts to make pragmatic contributions to the knowledge on

corporate disclosure and regional development. However, because of time limitations,

the weaknesses are naturally recognized in two folds. Firstly, since the scope of

investigation was focused on the adoption of the renewal ASEAN disclosure standards,

it might not be enough to illustrate the whole factors that could denote on corporate

disclosure in the ASEAN. In this line, the extension of relevant factors (e.g. type of

industry, economic development, legal origin, national culture) is required for better

understanding on the topic. Secondly, because a small number of representatives (only

1

11 listed companies from the five ASEAN countries) were brought together in the

inspection, the sampling of this research was restricted in both size and boundary.

Hence, further studies should be conducted based on a larger sample with various types

of organizations including unlisted or private enterprises in different areas.

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