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Article
Publication date: 10 April 2017

Abdifatah Ahmed Haji and Mutalib Anifowose

The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the authors…

2792

Abstract

Purpose

The purpose of this paper is to explore the implications of IR reforms in South Africa on corporate disclosure practices of South African companies. In particular, the authors explore initial trends in corporate disclosures following the adoption of IR practice.

Design/methodology/approach

Drawing from Suchman’s (1995) framework of strategic and institutional legitimacy, the authors use content analysis to examine corporate disclosure practices. The authors conduct industry-specific analyses based on various industries to explore corporate disclosures practices across and within various industries in South Africa. The evidence is drawn from 246 integrated reports of large South African companies across six major industries over a three-year period (2011-2013), a period following the introduction of an “apply or explain” IR requirement in South Africa.

Findings

The results first show a significant increase in the overall amount of corporate disclosures following the adoption of IR practice. In particular, the authors find that intellectual capital and human capital disclosure categories have increased over time, with relational capital disclosures showing a decreasing trend. Second, the authors find that corporate disclosures are increasingly becoming institutionalised over time across and within industries following the adoption of IR practice. However, companies fail to provide meaningful disclosures on the interdependencies and trade-offs between the capitals, or components of a capital following the adoption of IR practice. Overall, the authors find that companies use specific disclosure strategies to respond to external pressures (strategic legitimacy), and that such disclosure strategies are increasingly becoming institutionalised across and within various industries (institutional legitimacy).

Practical implications

The theoretical implication of this study is that the strategic and institutional perspectives of legitimacy theory are complementary, rather than conflicting, and dovetail to explain corporate reporting practices. In terms of practical implications, the adoption of specific reporting frameworks such as the emerging IR framework is a double-edged sword. On the one hand, such reporting frameworks could potentially enhance comparability and consistency of organisational reports across and within industries. On the other hand, corporate reports could become a set of monotonous reports motivated by considerations other organisational accountability. Hence, to overcome the latter, this study emphasises the importance of specific accountability metrics and reporting guidelines, rather than the current generic IR guidelines, to enhance organisational reporting practices.

Originality/value

The paper’s longitudinal analysis of a large sample of integrated reports following the adoption of IR practice has the potential to inform growing academic research and ongoing policy initiatives for the emerging IR agenda.

Details

Journal of Intellectual Capital, vol. 18 no. 2
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 5 September 2016

Abdifatah Ahmed Haji and Mutalib Anifowose

This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular, the…

4700

Abstract

Purpose

This paper aims to examine the role of the audit committee function as an internal assurance provider in the emerging integrated reporting (IR) practice. In particular, the authors examine the role of the overall effectiveness, as well as specific aspects, of the audit committee function in IR practice.

Design/methodology/approach

The authors examine the integrated reports of 246 firm-year observations of large South African companies over a three-year period (2011-2013), following the introduction of an “apply or explain” IR requirement and an embedded “combined assurance” model in South Africa. Drawing from conflicting theoretical perspectives of economics-based (e.g. agency theory) and socio-political theories (e.g. legitimacy theory), the authors develop competing hypotheses to predict the role of the overall, as well as specific aspects, of the audit committee function in IR practice.

Findings

Consistent with the predictions of economics-related theories, the authors find that the overall effectiveness of the audit committee function has a strong positive association with the extent and quality of IR practice. In particular, audit committee authority and meetings are shown to have a significant positive impact on IR practice. However, as implied by socio-political theories, the authors do not find a significant association between key aspects of the audit committee function such as audit committee independence and financial expertise and IR practice.

Practical implications

This study informs local and international regulatory authorities, as well as the business community, about the potential significance of internal assurance mechanisms such as the audit committee function in the emerging IR practice. Given the practical challenges associated with independent external assurance provisions, the findings of this study suggest that internal assurance mechanisms – such as the audit committee function – can be genuine and cost-effective alternative assurance mechanisms in enhancing the credibility and reliability of non-financial reporting practices, particularly the emerging IR practice. The results also inform academic researchers to take cognisance from the expanding roles and responsibilities of audit committees and conduct in-depth investigation on “how” the audit committee function is handling the increasing responsibilities.

Originality/value

The study provides initial empirical account towards the role of the audit committee function in the emerging IR practice. The study is novel because it shows the significance of internal assurance mechanisms in wider organisational reporting practice.

Details

Managerial Auditing Journal, vol. 31 no. 8/9
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 12 February 2018

Abdifatah Ahmed Haji and Nazli Anum Mohd Ghazali

The purpose of this paper is primarily to explore the extent of intangible assets and liabilities of large Malaysian companies. The authors also examine whether intangible assets…

2781

Abstract

Purpose

The purpose of this paper is primarily to explore the extent of intangible assets and liabilities of large Malaysian companies. The authors also examine whether intangible assets and liabilities of a firm have similar or contrasting roles in firm performance.

Design/methodology/approach

Using a direct and straightforward measure of intangible assets and liabilities, the authors examine a large pool of data from large Malaysian companies over a six-year period spanning from 2008 to 2013.

Findings

The longitudinal analyses show a significant number of the sample companies, between 34 and 59.33 percent, have a consistent pattern of intangible liabilities. The authors also find firms with intangible liabilities have significantly underperformed financially than a control group of firms. In addition, the authors find that intangible liabilities have significant negative impact on firm performance whereas intangible assets have a contrasting positive impact on firm performance.

Research limitations/implications

One limitation of this study is that the authors have only used a single measure of intangible assets and liabilities. Albeit the measures used are straightforward and more objective, there could be other measures to capture intangibles.

Practical implications

The research findings have several theoretical as well as policy implications. Theoretically, the authors extend the resource-based view to the intangible asset-liability mix, affirming the crucial role of intangible resources in financial performance whilst introducing the unfavorable role of intangible liabilities in corporate financial performance. In terms of policy implications, the research findings provide initial empirical input to emerging calls for broader perspectives of intangibles, beyond intangible assets to include intangible liabilities, and therefore belong to an emerging paradigm toward the nature of intangibles.

Originality/value

This study documents a rare empirical account of the contrasting roles of intangible assets and liabilities in corporate financial performance.

Details

Journal of Applied Accounting Research, vol. 19 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 3 May 2016

Abdifatah Ahmed Haji

The purpose of this study is to primarily examine the trend of hidden values and use of intellectual capital (IC) information narratives of leading Malaysian companies in the…

1403

Abstract

Purpose

The purpose of this study is to primarily examine the trend of hidden values and use of intellectual capital (IC) information narratives of leading Malaysian companies in the context of the recent financial crisis. The study then assesses the implications of IC information on a firm’s market value.

Design/methodology/approach

It examines the trend of hidden values and the corresponding role of IC information releases through analyses of archival data retrieved from Bloomberg and corporate annual reports of 153 firm-year observations across a three-year period (2008-2010). Various statistical and econometric data analyses were performed to examine the aforementioned exercises.

Findings

This study documents four main findings. First, the results show a significantly widening gap between market and book values during the financial crisis, with the market values consistently higher than the book values in all three years. Second, the hidden values significantly increased over time, with the increase becoming substantially higher in the years corresponding to the tail-end of the crisis. Third, the findings indicate that an increase in the hidden values results in a simultaneous increase in IC disclosures, with firms using IC information to inform and reflect their hidden values. Finally, it is shown that the overall amount of IC disclosures, and in particular human capital information, has a significant positive association with hidden values and, consequently, the market value of the companies.

Practical Implications

For IC researchers, the study shows the existence of a substantial amount of hidden values in the corporate landscape; thus, there is a need to actually uncover the pattern and creation of hidden values within firms through action research. For businesses, the study reveals the importance of releasing IC information narratives to a firm’s value creation process. The results are also important for policymakers in promoting integrated corporate reporting framework to report IC resources of a firm, perhaps a policy extending the recent mandatory requirement of corporate social responsibility (CSR) reporting in Malaysia.

Originality/value

This study presents a rare empirical assessment of the trend of hidden values and use of IC information narratives in the context of a recession. The findings can benefit companies and regulators in getting to know a growing level of hidden values – as well as the usefulness of IC information.

Details

Accounting Research Journal, vol. 29 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 31 August 2012

Abdifatah Ahmed Haji and Sanni Mubaraq

This paper longitudinally examines the intellectual capital (IC) disclosure practices of Nigerian banks following the restructuring exercise and the subsequent policy changes in…

1990

Abstract

Purpose

This paper longitudinally examines the intellectual capital (IC) disclosure practices of Nigerian banks following the restructuring exercise and the subsequent policy changes in the Banking sector.

Design/methodology/approach

Content analysis of annual reports of the banks was carried out over a period of four years (2006‐2009), a period following the consolidation exercise and the subsequent introduction of the mandatory code of corporate governance. A self‐constructed IC disclosure checklist was used to measure the extent of IC information disclosed in the annual reports. A number of statistical techniques were performed to assess the trend of IC disclosures and compare the IC disclosure categories.

Findings

The results show that the overall IC disclosures of the Nigerian banks increased moderately over the four year period. Human and internal capital disclosures dominated the banks' IC disclosures, with only internal capital disclosures showing a significant increasing trend over time.

Research limitations/implications

The increasing trend of IC disclosures of the banks suggests that the introduction of the mandatory code of corporate governance had positive implications on IC reporting practices. Hence, the findings of this study give support to previous research that established a strong positive association between IC disclosures and corporate governance development. However, this study only examines the IC disclosures of Nigerian banks following the reformation of the banking sector. Future research should incorporate other countries experiencing similar regulatory changes.

Practical implications

The introduction of the corporate governance code might have positively influenced the IC disclosure practices of the banks. However, the results had shown that the IC disclosures were mainly inconsistent and discursive in nature. Hence, the regulatory authorities, accounting setters and other relevant government agencies may wish to devise a detailed IC reporting framework for the banking sector.

Originality/value

Despite the significance of the banking sector to any economy, the IC disclosure practices of the banks largely remained unexplored. This study provides a much needed longitudinal assessment of the IC disclosures in the case of Nigerian banks following a major consolidation exercise and the introduction of a mandatory code of corporate governance specifically designed for the banks. The study also represents the first empirical investigation of IC reporting practices in Nigeria.

Details

Journal of Human Resource Costing & Accounting, vol. 16 no. 3
Type: Research Article
ISSN: 1401-338X

Keywords

Article
Publication date: 10 October 2016

Abdifatah Ahmed Haji and Dewan Mahboob Hossain

The purpose of this paper is to examine “how” the adoption of integrated reporting (IR), and the embedded multiple capitals framework, has influenced organisational reporting…

6117

Abstract

Purpose

The purpose of this paper is to examine “how” the adoption of integrated reporting (IR), and the embedded multiple capitals framework, has influenced organisational reporting practice. In particular, the paper examines how companies report and integrate multiple capitals in various organisational reporting channels following the introduction of an “apply or explain” IR requirement in South Africa.

Design/methodology/approach

Using a qualitative case study approach based on discourse analysis, this paper examines various organisational reports including integrated reports, standalone sustainability reports, websites and other online materials of highly regarded, award-winning, integrated reporters in South Africa over a four-year period (2011-2014), following the introduction of IR requirement. The authors draw five impression management techniques, namely, rhetorical manipulation, thematic manipulation, selectivity, emphasis in visual presentation and performance comparisons to explain disclosure and integration of multiple capitals.

Findings

The authors find that companies are increasingly conforming to reporting language espoused in existing IR guidelines and multiple capital frameworks over time. For instance, it is found that the research cases have increasingly used specific grammars in existing IR guidelines such as “capitals” and “material” issues, with companies acknowledging the “interdependencies” and “trade-offs” between multiple capitals. Companies have also started to recognise that the capitals are subject to “increases, decreases, and transformations” over time. However, the disclosures are generic, rather than company-specific, and lack substance, often framed in synthetic charming aimed to showcase adoption of IR practice. In addition, the current discourse on multiple capital disclosures is one of the defending, even promoting, organisational reputation, rather than recognising how organisational actions, or inactions, impact multiple capitals. The paper concludes that the emerging IR practice, and the embedded multiple capital framework, has not really improved the substance of organisational reports.

Practical implications

The results of this study have a number of implications for regulatory authorities, public and private sector organisations as well as academic researchers. For regulatory authorities, the results inform relevant regulatory authorities how IR practice is taking shape over time, particularly within the context of a regulatory setting. Second, the empirical analyses, which focused on highly regarded, award-wining, integrated reporters, draw the attention of regulatory bodies as well as users of corporate reports to concerns related to a growing number of rating agencies of organisational reports. Finally, for academic researchers, the theoretical implications of this study is that, given the pervasive use of multiple impression management techniques in various organisational reports, the authors support the notion that corporate disclosure practices should be examined through the lens of multiple theoretical perspectives to enhance our understanding of the nature of organisational reporting practice.

Originality/value

This study provides a more focused preliminary empirical account of the implications of IR practice, and the embedded multiple capital frameworks, on the quality of organisational reporting practice following the adoption of mandatory IR requirement in South Africa.

Details

Qualitative Research in Accounting & Management, vol. 13 no. 4
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 7 April 2022

Abdifatah Ahmed Haji, Paul Coram and Indrit Troshani

This study reviews research that examines economic and behavioural consequences of CSR reporting regulations. Specifically, the authors evaluate the impact of CSR reporting…

4592

Abstract

Purpose

This study reviews research that examines economic and behavioural consequences of CSR reporting regulations. Specifically, the authors evaluate the impact of CSR reporting regulations on (1) reporting quality, (2) capital-markets and (3) firm behaviour.

Design/methodology/approach

The authors first describe the stated objectives and enforcement level of CSR reporting regulations around the world. Second, the authors review over 130 archival studies in accounting, finance, economics, law and management that examine consequences of the regulations.

Findings

The stated objectives and enforcement of CSR reporting regulations vary considerably across countries. Empirical research finds no significant changes in reporting quality and generally concludes that CSR reporting continues to be ceremonial rather than substantive after the regulations – consistent with corporate legitimation and “greenwashing” views. In contrast, growing evidence shows both positive and negative capital-market and real effects of the regulations. Overall, the findings from this review indicate that, on balance, there remains a significant number of questions on the net effects of CSR reporting regulations.

Originality/value

The authors offer a comprehensive review of the literature examining consequences of CSR reporting regulations. The authors identify apparent tensions in studies assessing different outcomes after the regulations: between symbolic reporting and positive capital-market outcomes; between profitability and CSR; and between CSR and the welfare of non-shareholder groups. Additionally, we highlight differences in the scope and stated objectives of CSR regulations across countries, with the regulations often reflecting socio-economic development and national interests of implementing countries. Collectively, our review indicates that institutional details are crucial when considering the design or consequences of CSR reporting regulations and/or standards.

Details

Accounting, Auditing & Accountability Journal, vol. 36 no. 1
Type: Research Article
ISSN: 0951-3574

Keywords

Content available
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Abstract

Details

Accounting, Auditing & Accountability Journal, vol. 26 no. 6
Type: Research Article
ISSN: 0951-3574

Article
Publication date: 3 May 2016

Abdifatah Ahmed Haji and Mutalib Anifowose

The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa. In…

4223

Abstract

Purpose

The purpose of this paper is to examine the trend of integrated reporting (IR) practice following the introduction of an “apply or explain” IR requirement in South Africa. In particular, the authors examine whether the IR practice is ceremonial or substantive in the context of a soft regulatory environment.

Design/methodology/approach

By way of content analyses, the authors examine the extent and quality of IR practice using an IR checklist developed based on normative understanding of existing IR guidelines. The evidence is drawn from 246 integrated reports of large South African companies over a three-year period (2011-2013), following the introduction of IR requirement in South Africa.

Findings

The results show a significant increase in the extent and quality of IR practice. The findings also reveal significant improvements in individual IR categories such as connectivity of information, materiality determination process and reliability and completeness of the integrated reports. However, despite the increasing trend and evidence of both symbolic and substantive IR practice, the authors conclude that the current IR practice is largely ceremonial in nature, produced to acquire organisational legitimacy.

Practical implications

For academics, the authors argue that there is a need to move away from the “what” and “why” aspects of the IR agenda to “how” IR should work inside organisations. In particular, academics should engage with firms through interventionist research to help firms implement integrated thinking and substantive reporting practices. For organisations, the findings draw attention to specific aspects of IR that require improvement. For policymakers, the study provides evidence based on the developmental stage of IR practice and draws attention to certain areas that need clarification. In particular, the International Integrated Reporting Council and Integrated Reporting Committee of South Africa should provide detailed guidelines on connectivity of information, material issues and disclosure of multiple capitals and their trade-offs. Finally, for educators, in line with the ACCA’s embedment of IR in its accounting courses, there is a need to incorporate IR in the curriculum; in particular, the authors argue that the best way to advance IR is in a “ubiquitous” spread in accounting and management courses.

Originality/value

This study provides empirical account of IR practice over time in the context of a regulatory IR environment. The construction of an IR checklist developed based on normative understanding of local and international IR guidelines is another novel approach of this study.

Details

Sustainability Accounting, Management and Policy Journal, vol. 7 no. 2
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 5 October 2015

Abdifatah Ahmed Haji

This study aims to examine the role of audit committee attributes in non-financial information releases, with a focus on intellectual capital (IC) disclosures, following…

2987

Abstract

Purpose

This study aims to examine the role of audit committee attributes in non-financial information releases, with a focus on intellectual capital (IC) disclosures, following significant policy changes, mandating the audit committee function in Malaysia. The study argues that, given the changing informational needs of stakeholders and the ongoing discussion on integrated reporting, the role of the audit committee should extend to ensuring the overall quality of corporate reporting.

Design/methodology/approach

The study draws evidence from a sample of leading Malaysian companies based on their market capitalisation over a three-year period (2008-2010), a period subsequent to the recent policy changes. The extent and quality of IC information, as a surrogate of non-financial information, was measured and regressed against several audit committee attributes, such as audit committee size, independence, financial expertise and meetings, controlling the overall governance and firm-specific variables.

Findings

The findings show a strong positive role of the audit committee function in the overall amount of IC information as well as all three subcomponents of IC information (internal, external and human capital). The results are robust to controls for the overall governance and firm-specific attributes as well as different measures of IC information.

Practical implications

The results suggest that the role of the audit committee function extends to non-financial information communication such as IC. Policymakers in Malaysia should, therefore, build on the recent regulatory changes and encourage audit committees to ensure that the overall quality of corporate reporting processes include social, environmental, intellectual as well as financial capital of a firm.

Originality/value

This study considers the role of the audit committee in the wider corporate reporting process – drawing attention to its potential role in the espoused integrated business reporting. It also challenges the taken-for-granted assumption that restricts the role of the audit committee function to the traditional financial reporting process.

Details

Managerial Auditing Journal, vol. 30 no. 8/9
Type: Research Article
ISSN: 0268-6902

Keywords

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