The impact of audit committee characteristics on the extent of voluntary disclosure among Malaysian listed companies

Abstract

Disclosing of corporate voluntary information endorses the economic development and the solvency of company problems. Voluntary disclosures is expected to minimise the information gap between managers and shareholders and all other parties (external or concerned). Hence, disclosing more voluntary information would make financial information more useful to shareholders and reduces the information asymmety. Thus, this research examines the extent of voluntary disclosure among Malaysian listed companies, in association with audit committee characteristics. 394 annual reports of non-financial publicly listed companies are collected from Bursa Malaysia for the years 2016 and 2017. Five hypotheses are formulated based on agency theory and resource dependence theory to explain the research framework of the current study. The result shows that the extent of voluntary disclosure in the annual reports of Malaysian public listed companies is significantly greater. Findings shows that the audit committee independence and audit committee industry expertise are significantly and positively, related to the extent of voluntary disclosure. Thus, based on agency theory, independent directors are more likely to monitor the managers’ actions effectively to enhance disclosure and to minimise information asymmetry and agency problems. Hence, it may be suggested that audit committee plays a significant role in monitoring the financial reporting process. In light of this evidence, it will be useful to policy makers to enhance the role of audit committees in the financial reporting process.