Usefulness of environmental information in stakeholders` decisions : the case of Malaysia

Abstract

Pressure for companies to be accountable to wider stakeholders has encouraged companies to report non-financial information including information on employees, products and the environment. Although commendable, it costs companies time, energy and money. Accordingly, the information should be of value to corporate preparers and stakeholders. This study’s primary purpose is to examine the usefulness of environmental information in the decision-making of fund managers and bank lending officers. Specifically, two elements of information usefulness were investigated: perceived usefulness and actual use of environmental information. Normative pressure of institutional theory was used whereby the educational background and professional training received by the fund managers and bank lending officers may influence their perception and actual use of environmental information in decision-making. Interestingly, the present study also incorporated Islamic aspects by investigating the difference in perception between Muslim and non-Muslim fund managers concerning the usefulness of environmental information. A mixed methods approach was used with quantitative (surveys and experiments) and qualitative (interviews) methods to collect the data. A total of 59 (fund managers) and 54 (bank lending officers) questionnaires were completed. Furthermore, 23 subjects volunteered in each experimental group, totaling 69 responses from fund managers and bank lending officers. The subjects were MBA students in universities located in Selangor and Kuala Lumpur. Eight fund managers and six bank lending officers were interviewed. The results reveal that both groups rated many environmental items as important. However, this is not shown in the experimental results. Additionally, no differences were found in perception between Muslim and non-Muslim fund managers. Overall, the results partly support the normative isomorphism of institutional theory. Thus, the present study makes a significant contribution to environmental reporting research, companies and practitioners in Malaysia. Further research on the usefulness of environmental information to different groups of stakeholders and experimental surveys with real practitioners is proposed.