Corporate social responsibility and
corporate governance in Malaysian
government-linked companies
Elinda Esa and Nazli Anum Mohd Ghazali
Elinda Esa is a Lecturer at
the Universiti Tenaga
Nasional, Bandar Muadzam
Shah, Malaysia.
Nazli Anum Mohd Ghazali is
an Associate Professor in
the Department of
Accounting, International
Islamic University Malaysia,
Kuala Lumpur, Malaysia.
Received July 2010
Accepted December 2010
PAGE 292 j CORPORATE GOVERNANCE
Abstract
Purpose – The purpose of this paper is to investigate whether there has been a change in the level of
corporate social responsibility (CSR) disclosure and to determine whether corporate governance
attributes influence CSR disclosure in corporate annual reports of Malaysian government-linked
companies (GLCs).
Design/methodology/approach – The annual reports of 27 GLCs for two years (2005 and 2007) were
analysed using content analysis. Multiple regression analysis was performed to identify factors
influencing CSR disclosure in annual reports.
Findings – Consistent with expectations, the paired-sample t-tests showed that there was an increase
(significant at the 1 percent level) in the extent of CSR disclosure. The multiple regression analysis
revealed that board size was positively associated and statistically significant (at the 1 percent level)
with the extent of CSR disclosure.
Research limitations/implications – The regression model reported an R 2 of 33.9 percent, which
means that almost 66 percent of factors influencing CSR disclosure in Malaysian GLCs have not been
captured by the model. These other factors may perhaps be identified through other research methods
such as questionnaire surveys or interviews.
Practical implications – The findings appear to suggest that the government efforts in promoting CSR
among GLCs through the introduction of the Silver Book in 2006 have had some positive impact on CSR
disclosure in annual reports. The results also imply that larger board size through wider exchange of
ideas and experience could lead to better appreciation and involvement in corporate social activities
and hence disclosure in annual reports.
Originality/value – This paper is one of the few studies to examine CSR disclosure and corporate
governance attributes in GLCs after the introduction of new initiatives to promote CSR.
Keywords Corporate social responsibility, Corporate annual reports, Corporate governance,
Disclosure, Government-linked companies, Financial reporting, Malaysia
Paper type Research paper
Introduction
Corporate social responsibility (CSR) disclosure can be defined as the provision of
information regarding human resource aspects, product and service, involvement in
community projects including philanthropic activities and environmental matters. Research
on CSR can be traced back to the 1980s (see for example Guthrie and Mathews, 1985; Gray
et al., 1987; and Guthrie and Parker, 1989). Since then a number of studies have examined
CSR in both developed (e.g. Hackston and Milne, 1996; Gray et al., 1995, 2001; Coffey and
Wang, 1998; Adams et al., 1998; Newson and Deegan, 2002; O’Dwyer, 2002) and
developing countries (e.g. Singh and Ahuja, 1983; Andrew et al., 1989; Tsang, 1998;
Williams, 1999; Abu-Baker and Naser, 2000; Kuasirikun and Sherer, 2004; Haniffa and
Cooke, 2005; Lim et al., 2008). These studies have examined the nature, extent and factors
influencing CSR disclosure in annual reports.
j VOL. 12 NO. 3 2012, pp. 292-305, Q Emerald Group Publishing Limited, ISSN 1472-0701 DOI 10.1108/14720701211234564
In recent years the interests in CSR have been partly contributed by the increased
awareness on corporate accountability. In Malaysia, following the 1997 Asian financial crisis,
the Malaysian Institute of Corporate Governance was established in 1998 and subsequently
the Malaysian Code on Corporate Governance (the ‘‘Code’’) was released in 2000[1]. One
of the best practices in corporate governance included in the Code is that the board should
receive information that is not only financial-oriented but other performance indicators such
as customer satisfaction, product and service quality, and environmental performance. This
requirement could be expected to put some pressure on company management to engage
in more socially responsible activities and hence disclosure in annual reports. In addition,
Bursa Malaysia (BM, formerly known as the Kuala Lumpur Stock Exchange) as part of its
efforts in promoting CSR, has introduced a CSR Framework and Guideline in 2006. The CSR
Framework is essentially a set of guidelines for Malaysian public listed companies (plcs) to
assist them in CSR practices[2].
A number of studies including Teoh and Thong (1984), Andrew et al. (1989), Mohamed Zain
et al. (2006), Janggu et al. (2007), Mohd Ghazali (2007) and Said et al. (2009) have
examined CSR in Malaysia. However none of these studies has focused specifically on CSR
in government-linked companies (GLCs). The present study extends prior studies on CSR
by examining if there had been changes in the extent of CSR disclosure in Malaysian GLCs
and determining whether corporate governance attributes influence CSR disclosure in
Malaysian GLCs. Examining CSR in Malaysian GLCs would give some indication on whether
efforts and guidelines implemented in enhancing CSR have had some positive impact on
corporate social activities.
GLCs as defined by the Putrajaya Committee for GLC High Performance[3] are companies
that have primary commercial objective and in which there is a major ownership and direct
controlling stake by the Malaysian Government. This definition includes companies where
the GLCs themselves have a controlling stake in it, i.e. subsidiaries or affiliates. Due to
having a major ownership, the government has the power to appoint the board members,
senior managements and make decisions for GLCs either directly or through
government-linked investment companies (GLICs).
GLCs have evolved into an important national institution, and many companies have
become well-recognized corporate names regionally. GLCs constitute a vital part of the
Malaysian economy and make up for nearly 49 percent[4] of the market capitalization of
Bursa Malaysia. A significant amount of efforts has been put into promoting CSR among the
GLCs. As one of the steps towards promoting CSR disclosure, the government takes a
proactive role through the implementation of the GLC Transformation Program 2005/06.
Under this program, CSR issues are being stressed in The Silver Book (2006), one of the
initiatives included in the GLC Transformation Manual. The Silver Book, which was launched
in September 2006, provides a strategic framework for GLCs to proactively contribute in a
socially responsible manner. It guides GLCs to establish an effective contribution program,
minimize the cost of any social obligations and transmute these obligations into positive
social contributions. As a starting point, the Silver Book recommends that GLCs evaluate the
effectiveness of their contributions to society program using a self-assessment scorecard.
To ensure an effective contribution to society program, GLCs are to develop a
comprehensive policy that are aligned to the GLCs’ overall business strategy and their
stakeholders’ expectations. Being a business where the government has a major ownership
and control, GLCs are expected to lead others in good corporate practices including CSR
practices.
It has been suggested that corporate governance and CSR are two sides of the same coin
(Bhimani and Soonawalla, 2005). That is because both CSR and corporate governance
emphasize on companies to discharge their duties and responsibilities to the stakeholders
(Jamali and Rabbath, 2007). Additionally CSR and corporate governance also stress on the
importance of achieving long term value which in turn will assist in promoting a business
continued acceptance and existence. In is noteworthy that the Silver Book has included in
the guidelines for evaluating ‘‘contributions assessment index’’[5] the role of the Board of
Directors as part of the assessment factors. The index asks whether there is a formal Board

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 supervision that sets the overall direction of the contribution program and regularly monitors
the management of the contributions to society. The inclusion of the Board in the index
shows that the government expects company directors to be involved in planning,
implementing and assessing corporate social activities.
The research questions of this paper are as follows:
(1) Has there been a change in the extent of CSR disclosure among Malaysian GLCs after
the introduction of the Silver Book?
(2) Do corporate governance attributes influence CSR disclosure in Malaysian GLCs?
This paper contributes to the existing literature on CSR disclosure in a number of ways. First,
it provides evidence that regulatory efforts have some impact on corporate social disclosure.
Examination of annual reports of 27 GLCs revealed that the extent of CSR disclosure was
higher in 2007 than in 2005. This implies that the introduction of the Silver Book in 2006 have
had some positive impact on CSR in Malaysian GLCs. The finding implies that regulatory
efforts designed to promote CSR in Malaysian GLCs have proved to be fruitful. Second, the
finding also shows that corporate governance has some influence on CSR. The multiple
regression analysis showed that board size was significantly associated with the extent of
CSR disclosure. The positive association suggests that GLCs with more board members
disclosed more CSR information in their annual reports. It would appear that larger board
size will stimulate healthier corporate discussions and consequently engagement and
disclosure of CSR activities in Malaysian GLCs. With more board members of diverse
experience, knowledge and skills these companies appeared to better appreciate the
importance of being good corporate citizens.
The remainder of the paper is organized as follows. The next section reviews relevant
literature to develop the research hypotheses. The research method including sample
selection and collection is then explained. Findings and analysis are then provided before
concluding the paper with limitations and suggestions for future research.

Development of hypotheses
Six hypotheses are developed in this study. The first relates to the extent of CSR disclosure.
Two corporate governance variables, namely board size and independent directors on the
board are investigated to determine whether these factors which are included in the Code
have any association with CSR disclosure in Malaysian GLCs. Company size, profitability
and leverage are included as control variables.

The extent of CSR disclosure

It may be expected that if GLCs are to portray good corporate citizenship, they would invest
in more social activities and hence disclosure of those activities. In this context, disclosure
may be used to portray a good image. There are ten initiatives included in the GLC
Transformation Manual. One of the initiatives is the Silver Book which acts as a guideline for
GLCs to proactively contribute to social responsibility and at the same time creates value for
their shareholders. The Silver Book’s objectives are to clarify the expectations on GLCs
contributions to society, to guide GLCs in evaluating their starting position in contributing to
society and to provide GLCs with a comprehensive set of tools, methodologies and
processes to proactively contribute to the society in a responsible manner. Therefore, with
the introduction of the Silver Book through the transformation program, GLCs are expected
to engage in more CSR activities and have more disclosure of CSR activities in the annual
report. The hypothesis is expressed as follows:
H1. There is a significant increase in the extent of CSR disclosure in the annual reports
of Malaysian GLCs after the introduction of the Silver Book.

Board size
Jensen (1993) argued that larger board size may result in disagreements while proponents
of board size suggest that more board members would lead to wider exchange of ideas and

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experiences. While prior studies have examined the relationship between board size and
corporate performance (e.g. Conyon and Peck, 1998; Eisenberg et al., 1998; Dehaene et al.,
2001; Chin et al., 2004; Mak and Kusnadi, 2005), research examining the relationship
between board size and CSR disclosure is sparse. Cheng and Courtenay (2006) did not find
board size to be a significant variable influencing voluntary disclosure while Said et al.
(2009) found weak relationship[6] between board size and the extent of CSR disclosure.
In the Malaysian context, the Code (revised 2007) does not specify the number of board
members rather let the board decides taking into consideration the impact of size on board
effectiveness[7]. The Green Book which is one of the ten initiatives included in the GLC
Transformation Program 2005/06 states that board size should not be larger than ten
directors. However, the guideline allows the size to the maximum of 12 directors if there are
legitimate reasons that necessitate such big composition. The Silver Book does not indicate
what is the optimum board size but gives weight to Board’s involvement in corporate social
activities. As evidence from prior study is limited no expectation is formed regarding the
direction of association between board size and CSR disclosure. The hypothesis is as
follows:
H2. There is a significant association between board size and the extent of CSR
disclosure in Malaysian GLCs

Independent directors
In a corporate governance context, independent directors are expected to perform a
monitoring role ensuring that shareholders’ interests are taken into consideration when
arriving at board decisions. However, the relationship between independent directors and
the extent of CSR disclosure is unclear. While prior studies have documented significant
positive association between independent directors and voluntary disclosure in general
(e.g. Cheng and Courtenay, 2006; Huafang and Jianguo, 2007; and Donnelly and Mulcany,
2008), others (e.g. Eng and Mak, 2003; and Barako et al., 2006) found the opposite. The
argument for a negative association between independent directors and the extent of
disclosure is that independent directors are a cost-efficient substitute for information
disclosure.
In Malaysia, the Code requires that independent directors to be at least one-third of the
board membership. This requirement can be interpreted as expecting more independent
boards to be more effective in its monitoring role. Haniffa and Cooke (2002) and Mohd
Ghazali and Weetman (2006) did not find independent directors to be a significant variable
influencing voluntary disclosure in Malaysia. However those studies did not examine GLCs
in particular and were investigating voluntary disclosure in general rather than CSR. As the
relationship between independent directors and the extent of CSR disclosure has not been
examined widely the finding of the present study will add to our understanding on the role of
independent directors in promoting CSR. The hypothesis is as follows:
H3. There is a significant association between independent directors and the extent of
CSR disclosure in Malaysian GLCs

Company size
Larger companies can be expected to disclose more CSR information to show or portray
their corporate citizenship, thereby legitimizing their existence (Mohd Ghazali, 2007). In
addition, larger companies usually undertake more activities, make a greater impact on
society, have more shareholders who might be concerned with social programs undertaken
by the company and the annual report can be an efficient means of communicating this
information (Cowen et al., 1987).
Evidence from previous studies supports the existence of a positive relationship between
company size and disclosure level (e.g. Wallace et al., 1994; Ahmed, 1995; Zarzeski, 1996).
Belkaoui and Karpik (1989) found that there was a positive relationship between size and the
content of corporate social disclosure. A similar finding was also reported by Patten (1991),
Hackston and Milne (1996), Abdul Hamid (2004) and Mohd Ghazali (2007) and Said et al.

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 (2009). Based on the results of prior studies, a positive relationship is expected between
company size and CSR disclosure. The hypothesis is as follows:
H4. There is a significant positive association between company size and the extent of
CSR disclosure in Malaysian GLCs

Profitability
Belkaoui and Karpik (1989) suggested that socially responsible companies can be
expected to be more profitable as these companies would have the necessary ingredients of
a successful company. However there has also been argument that investment in CSR
activities may require additional costs and hence reduce the profits of a company (see for
example Balabanis et al., 1998). Additionally Williams (1999) was of the view that CSR is
more associated with ‘‘public’’ rather than ‘‘economic’’ pressure. Empirically, prior studies
(e.g. Patten, 1991; and Richardson and Welker, 2001) have documented that profitability
was not a significant variable affecting CSR disclosure.
In the Malaysian context, empirical results on the association between profitability and the
extent of CSR disclosure are mixed. While Abdul Hamid (2004) did not find profitability to be
a significant variable influencing CSR disclosure[8], Haniffa and Cooke (2005) and Said et al.
(2009)[9] found significant positive relationship between profitability and the extent of CSR
disclosure in Malaysian non-financial companies. As the present study is using a different
category of sample comprising of GLCs, the finding may add to knowledge on the impact of
economic performance on CSR disclosure in GLCs. The hypothesis is expressed as follows:
H5. There is a significant association between profitability and the extent of CSR
disclosure in Malaysian GLCs

Leverage
Firms with high debt levels are expected to incur high monitoring costs. Therefore,
managers of high debt firms may seek to reduce these costs by disclosing more information
in annual reports (Ahmed and Courtis, 1999). In other words, highly leveraged companies
are expected to disclose more information to assure creditors that shareholders and
management are less likely to bypass their covenant claims. Leverage has been found to be
significant and positively associated with the extent of disclosure by Naser et al. (2002) and
Ferguson et al. (2002). In contrast, Ho and Wong (2001), Chau and Gray (2002) and
Huafang and Jianguo (2007) did not find leverage to be significantly associated with
voluntary disclosure. Haniffa and Cooke (2005) did not find leverage to be a significant
factor influencing corporate social disclosure. As the empirical evidence is inconclusive, no
expectation is formed regarding the direction of association between leverage and the
extent of CSR disclosure. The hypothesis is as follows:
H6. There is a significant association between leverage and the extent of CSR
disclosure in Malaysian GLCs

Research method
Data
The sample for this study comprised of GLCs which were listed on Bursa Malaysia in both
years 2005 and 2007. The lists of GLCs were obtained from the Putrajaya Committee on
GLCs High Performance web site (www.pcg.gov.my). The year 2007 was chosen because it
was the most recent data available at the start of the study. Furthermore the study aimed at
determining whether there has been an increase in the level of CSR disclosure in Malaysian
GLCs after the introduction of the Silver Book which was launched in 2006. For comparison
purposes, the year 2005 was chosen to represent the year before the introduction of the
Silver Book.
On examining the lists of GLCs for the years 2005 and 2007, it appeared that there were 59
companies listed in 2005 while the figure for 2007 was 39. Excluding financial companies,

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 the number of GLCs which were listed in both years was 27. The annual reports for these 27
companies for both years 2005 and 2007 were then downloaded from the BM web site.

Research instrument
The extent of CSR disclosure was determined by applying a disclosure checklist on the
selected corporate annual reports. The checklist employed was adopted from Mohd Ghazali
(2007) with the exception of one item, the Statement on Internal Control which became a
mandatory disclosure in annual reports of companies with financial years ending after 31
December 2001. It was considered appropriate to use the checklist in Mohd Ghazali (2007)
as the study was examining CSR disclosure in Malaysian listed companies. The checklist in
Mohd Ghazali (2007) was based on checklists developed by previous researches on
voluntary disclosure particularly those on Malaysian companies[10]. In finalizing the
checklist, reference was made to the reporting guidelines for external stakeholders in the
Silver Book. The items proposed in the guidelines are indicated on the CSR disclosure
checklist attached in the Appendix (Table AI).

Scoring method
Scoring was based on the existence of the items as the study was focusing on the extent of
disclosure. Additionally each item of disclosure is equally weighted as the study is not
examining the importance or relevance of the items to any particular user-group. This means
that if an item in the checklist is disclosed, a score of 1 is awarded, if not a 0 will be recorded.
The number of items disclosed was then divided by the maximum possible score to arrive at
the CSR disclosure index. The CSR index was used as the dependent variable in this study.

Results and analysis

Table I shows that the extent of CSR disclosure generally has increased from an average of
49.03 percent in 2005 to 56.08 percent in 2007. There were also a greater number of
companies recording disclosure index of more than 50 percent in 2007 (19 companies, 70.4
percent). In 2005 the number of companies with more than 50 percent index was 13 (48.1
percent). Additionally, Table I also highlights that one company disclosed all the items in the
checklist in its company annual report in 2007. These findings suggest that the extent of CSR
disclosure in Malaysian GLCs has improved.
To determine if there was a significant difference in the mean scores of disclosure in 2005
and 2007, a paired sample t-test was carried out. The results reveal that the increase in the
extent of disclosure was statistically significant at the 1 percent level (mean
difference ¼ 2 0.07053; std deviation ¼ 0.1083; sig. ¼ 0.002). This result is further
supported by the non-parametric Wilcoxon Signed Rank test (z ¼ 22.965; sig. ¼ 0.003).

Table I The extent of disclosure: descriptive statistics

CSR disclosure index
2005 2007
Number % Number %

Minimum 19.05 23.81

Maximum 90.48 100
Mean 49.03 56.08
90%-100% 1 3.7 1 3.7
80%-89.9% 0 0 1 3.7
70%-79.9% 4 14.8 2 7.5
60%-69.9% 3 11.1 10 37.0
50%-59.9% 5 18.5 5 18.5
40%-49.9% 4 14.8 1 3.7
30%-39.9% 5 18.5 6 22.2
20%-29.9% 2 7.5 1 3.7
10%-19.9% 3 11.1 0 0
, 10% 0 0 0 0
Total 27 100 27 100.0

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 These findings show that the introduction of the Silver Book in 2006 has some positive impact
on the extent of CSR disclosure in Malaysian GLC annual reports.
To determine factors influencing CSR disclosure a multiple regression model employing six
independent variables was carried out.
The regression model is as follows:
CSRdisc ¼ b0 þ b1 Boardsize þ b2 IndNED þ b3 Size þ b4 Pr of þ b5 Lev þ b6 Year

Table II shows operationalization of variables included in the regression model.

Data for the previous variables were gathered from company annual reports except for
market capitalization which was obtained from Bloomberg.
The descriptive statistics for the independent variables are given in Table III.
Referring to Table III, market capitalization and profitability were higher in 2007 than in 2005.
This implies that during the period of investigation, on average sampled GLCs had an
increase in market value and were more profitable. Leverage has a somewhat less variant
level among the companies in 2007 with the minimum at 11 percent, maximum at 82 percent
and an average of 45 percent. In contrast, there were no changes in the proportion of
independent directors on the board. Neither was there any change in the board size.
However, the fact that the minimum proportion of independent directors on the board was
0.286 for both years raises question on the enforcement authority in Malaysia. The BM
Listing Requirements require all listed companies to have at least one-third of board
members to be independent. The finding in the present study shows that there were still
companies not complying with this requirement.
The collinearity between the independent variables is shown in Table IV.
High correlations may result in problems in interpreting the results because when two or
more independent variables are correlated, their respective unique individual contribution to

Table II The regression variables

Variable Definition/operationalization

CSR disc b CSR disclosure index

b0 . . .b6 Regression coefficients
Boardsize Number of directors on the board
IndNed Proportion of independent non executive directors on the board
Size Company size measured by market capitalization
Prof Profitability measured by profit before tax over total assets
Lev Leverage measured by total liabilities over total assets
Year 1 if data are from 2005, 0 if 2007

Table III Descriptive statistics

n Min Max Mean SD

Year 2005 (before the introduction of the Silver Book)

Size 27 88.96 35,427.70 6,245.9 10,474.61
Prof (%) 27 20.2538 0.1863 0.0452 0.0841
Lev (%) 27 0.0686 2.0768 0.5475 0.3722
IndNED (%) 27 0.2860 0.6250 0.4262 0.0897
Boardsize 27 6 12 8.56 1.74

Year 2007 (after the introduction of the Silver Book)

Size 27 319.95 43,100 8,574.90 12,650.61
Prof (%) 27 20.0500 0.1820 0.0867 0.0452
Lev (%) 27 0.1120 0.8210 0.4499 0.1950
IndNED (%) 27 0.2860 0.6250 0.4262 0.0897
Boardsize 27 6 12 8.56 1.55

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Table IV Pearson correlations among continuous independent variables
Year 2007
Size Prof (%) Lev (%) IndNED (%) Boardsize CSRDisc

Size 0.046 0.104 0.393* 0.399* 0.111

Prof (%) 0.242 20.090 20.005 0.125 0.178
Lev (%) 20.046 20.456* 0.365 0.087 0.140
IndNED (%) 0.396* 0.083 20.029 0.245 20.003
Boardsize 0.391* 0.289 20.181 0.231 0.333
CSRDisc 0.422* 0.260 20.024 0.153 0.596**
Year 2005

Notes: *Correlation is significant at the 0.05 level (two-tailed); **correlation is significant at the 0.01 level (two-tailed)

the prediction of the independent variable may become indeterminate (Mendenhall and
Reinmuth, 1982; p.335). Whether the presence of multicollinearity poses a serious problem
to the interpretation of data depends partly on the degree of collinearity. While Gujarati
(1995, p. 335) and Kennedy (1999, p. 187) suggested that collinearity should not be
considered harmful until the correlation coefficient exceeds 0.8 or 0.9, Tabachnick and Fidell
(2001, p. 84) proposed a more stringent cut-off point of 0.7. Multicolinearity was also
assessed using the variance inflation factor (VIF) computed by the regression analysis on
SPSS. As none of the correlations in Table IV exceed 0.7, results on multiple regression can
be interpreted accordingly.
The simultaneous impact of all the independent variables on CSR disclosure is summarized
in Table V.
Table V shows that the VIFs of all independent variables are below 2. Collinearity is
considered a problem only when VIF exceeds 10 (Neter et al., 1983; p. 392; and Gujarati,
1995; p. 339). These results further support the lack of presence of multicollinearity in the
regression model.

The model which incorporates six independent variables namely board size, the proportion
of independent directors on the board, company size, profitability, leverage and year is
significant at the 1 per cent level (sig.¼0.002) and is able to explain 33.9 per cent of the
variations in CSR disclosure in Malaysian GLCs for the two-year period 2005 and 2007
(R-squared ¼ 33.9 per cent). Board size is significant at the 1 per cent level while leverage
and the proportion of independent directors are significant at the 10 per cent level.
The positive association between board size and the extent of CSR disclosure implies that
GLCs with larger board size disclosed significantly more CSR information than others. This
finding is consistent and provides some support to an earlier finding by Said et al. (2009). It

Table V Multiple regression analysis results

Variables Beta Significance Tolerance VIF

(Constant) 0.881
Lev (%) 0.230 0.074* 0.887 1.127
IndNED (%) 20.218 0.080* 0.799 1.063
Boardsize 0.413 0.003** 0.771 1.297
Size 0.082 0.562 0.719 1.391
Prof (%) 0.097 0.470 0.799 1.251
Year 0.183 0.162 0.848 1.179
R2 0.339
Adjusted R 2 0.255
F-statistics 4.020
Significance 0.002

Notes: *Significant at 10 per cent; **significant at 1 per cent

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 would appear that in the Malaysian context having larger board size may contribute towards
wider and fruitful discussions on CSR and hence investment in those activities.
In contrast, GLCs in which there were larger proportion of independent directors disclosed
less than others. This finding is consistent with Eng and Mak (2003) and Barako et al. (2006).
The result may imply that engagement in CSR activities are not the primary concern of
independent directors. Perhaps independent directors prefer to focus more on corporate
financial rather than social performance. Nonetheless this finding should be interpreted
cautiously as the result is significant at only the 10 per cent level.
Leverage is also significant at the 10 per cent level. However, the relationship is positive
which means that higher leveraged GLCs disclosed more CSR information in their annual
reports. This finding appears to be consistent with Naser et al. (2002) and Ferguson et al.
(2002). In the present study context, higher geared GLCs perhaps needed to disclose more
CSR information to signal that managers have allocated certain amount of corporate
resources in social events. That may alleviate some fears on the part of debt-holders on
managers’ opportunistic activities.
Company size and profitability are not significant which means that decision to disclose CSR
information in the annual reports is not influenced by these two factors. The non-significance
of company size may be due to the sample which comprised mainly of large Malaysian
GLCs. Hence size may not be a good indicator of factors influencing CSR in Malaysian GLCs
as the majority of GLCs are big corporations. The non-significance of profitability is
consistent with Patten (1991), Richardson and Welker (2001) and Abdul Hamid (2004). This
finding provides some support to Williams (1999) argument that CSR disclosure is more
influence by ‘‘public’’ rather than ‘‘economic’’ pressure.

Conclusions, limitations and suggestions for further research

This paper has examined the extent of CSR disclosure in Malaysian GLCs with the
expectation that after the introduction of the Silver Book in 2006 which provides guidelines to
GLCs to proactively engage in CSR activities, more CSR activities would be undertaken and
hence disclosed in company annual reports. The research also investigated whether
corporate governance attributes have an impact on CSR disclosure in Malaysian GLCs.
Consistent with expectations, the paired-sample t-test revealed that there was an increase in
the extent of CSR disclosure of Malaysian GLCs in 2007 as compared to 2005 and the
increase was statistically significant at the 1 per cent level. This finding implies that the
introduction of the Silver Book has had some positive impact in terms of encouraging GLCs
to engage in more CSR activities and hence disclosure of those activities in the annual
reports. Additionally the multiple regression analysis showed that board size was a
significant factor influencing the extent of CSR disclosure in annual reports. It would appear
that GLCs with a larger board size disclosed significantly more CSR information than others.
This finding suggests that boards with more members with diverse experience and
backgrounds are more exposed to healthier and livelier discussion on corporate social
activities and hence investment in those activities.

Limitations of study
This study has focused on CSR disclosure in annual reports of Malaysian GLCs. It is worth
mentioning that disclosure in annual report is but one way of examining the extent of
corporate involvement in social activities. Companies may decide to report the CSR
activities in a stand-alone report or company brochures or even not reporting them at all as
CSR reporting is voluntary. In other words, disclosure in annual reports should not be taken
as the complete measure of corporate social engagements[11]. In addition, the findings of
this paper may not be generalized to all Malaysian companies as the sample comprised of
only non-financial listed GLCs. These companies are generally large in size and under the
control of the government which implies that the pressure and costs faced by these
companies may not be the same as others.

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Suggestions for future research
Future research in CSR disclosure may perhaps perform a longitudinal analysis to capture
the trend in CSR reporting in Malaysian GLCs. The present study looked at CSR disclosure
for two years 2005 and 2007 which was before the global financial crisis which started in
2008. Extending the analysis period to include post financial crisis period may provide some
evidence as to whether the financial crisis had an influence on corporate social activities.
Extending the analysis to included non-GLCs may also be worthwhile to further provide
support (or otherwise) on the influence of regulatory factors[12] on CSR engagements. On a
methodological standpoint, future can benefit by utilizing a different approach to data
collection such as interviews to gain insights into other factors influencing CSR activities and
disclosure. The method adopted in the present study was able to test only those factors
which are quantifiable and hence can be included in the regression analysis. In-depth
interviews may generate data that can help clarify, support and validate the results from
statistical analysis. In this context, interview method may help enrich the interpretation of
quantitative research and unravel other qualitative factors influencing CSR activities and
hence disclosure in annual reports.

Notes
1. The Code was revised in 2007 with key amendments aimed at strengthening the board of directors
and audit committees.
2. The framework looks at four main focal areas for CSR practice – the environment, the workplace, the
community and the marketplace.
3. The Putrajaya Committee for GLC High Performance was formed in January 2005 to follow through
and catalyse the GLC Transformation Program. Its principal mandate is to design and implement
comprehensive national policies and guidelines to transform GLCs into high performing entities and
establish the institutional framework to program-manage and subsequently to oversee the execution
of these policies and guidelines. Source: www.pcg.gov.my
4. Source: www.csr-malaysia.org/ (accessed 10 July 2010)
5. See Exhibit 1.1.1B Contributions Index Assessment Guideline (IV) in the Silver Book Appendix.
6. The relationship was positive and significant at the 10 per cent level.
7. The Corporate Governance Guide issued by the BM in 2009 likewise also does not specify a board’s
optimum size.
8. The difference in result could be partly due to sample selection. In Abdul Hamid (2004), the sample
comprised of financial institutions only.
9. However, the relationship was only significant at the 10 per cent level.
10. See Mohd Ghazali (2007) on the construction of the CSR disclosure checklist.
11. However, BM now requires all public listed companies to disclose their CSR activities or practices
and if there are none, a statement to that effect (BM Listing Requirements, Appendix 9c, Part A[29]).
This requirement came into effect on 31 December 2007. Source: www.klse.com.my

12. The Silver Book was launched as a guideline for GLCs to further engage in CSR activities. Thus, an
investigation of CSR of GLCs and non-GLCs after the year 2007 may indirectly help in determining
whether the Silver Book had succeeded in promoting CSR in GLCs.

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(The Appendix follows overleaf.)

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Appendix

Table AI CSR disclosure checklist

Disclosure items

Human resource
1 Breakdown of employees by the line of business
2 Breakdown of employees by level of qualification/exec vs non executive
3 Breakdown of employees by ethnic origin
4 Employees appreciationa
5 Policy on traininga
6 Amount spent on training
7 Number of employees trained
8 Discussion of employees’ welfarea
9 Safety policy
10 Information on accidents at workplace

Value-added information
11 Value added statement

Environment
12 Environmental policya

Community involvement
13 Charitable donations/sponsorshipa
14 Participation in government social campaigna
15 Community programs (health and education)a

Product or service information

16 Discussion of major types of products/services/projectsa
17 Product safetya
18 Improvement in product quality
19 Improvement in customer service
20 Distribution of marketing network for finished products
21 Customer awards/ratings received

Note: aThese are among the items proposed in the reporting guidelines for external stakeholders in
the Silver Book

Corresponding author
Nazli Anum Mohd Ghazali can be contacted at: nazlianum@iium.edu.my

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