The Quality of Departure Explanations on Integrated Reporting by Companies in Malaysia

Abstract

In Malaysia, the integrated reporting practice was incorporated into its governance code in 2017. A company’s implementation of integrated reporting can help it develop a sustainable business. However, some large companies departed from the recommendation of integrated reporting despite its importance towards achieving successful sustainable development by providing departure explanations. Hence, this paper aims to assess the quality of departure explanations using a constructed checklist based on the Bursa Malaysia Listing Requirements as departure explanations quality remains underexamined, especially under the ""Comprehend, Apply and Report"" (CARE) approach. This study applies the content analysis method to Corporate Governance Reports (CG Report) regarding disclosure towards the application of integrated reporting to a sample of large Malaysian companies from 2018 to 2020. It was found that most companies did not provide a meaningful explanation as required by the listing requirements. Instead, most companies provide boilerplate and generic statements that do not give any significance to users in understanding the company’s decision not to adopt integrated reporting. Only 17 out of 169 sample companies of the accumulated three-year period provide adequate explanations. These findings would interest the policymakers and regulators in strategizing ways to improve disclosure provided in the CG Report.