武汉科技大学城市学院专业论文

aspects of items included in index from 17, Barrel Bubby and 224, Cooke. In some studies, they compared the transparency or disclosure of accounting information in cross-countries. Transparency that also defined as level of disclosure in many previous researches is measured by using CIFAR index introduced by CIFAR's International Accounting and Auditing Trends. The index represents the average number of 90 accounting and non-accounting items disclosed by a sample of large companies in their annual reports. Most of the study employed a scoring sheet to grade the information disclosed in annual reports. As for the grading criteria concern, Thompson the CTI Index used a scorecard developed by Business Times (Singapore's financial daily) to see the level of transparency of 290 Singapore listed companies. Equal weighting to content and context were then analyzed. Multiple regression models were used to measure the association between selected company characteristics (size and profitability) and the transparency index.

Pauline and Mathew (18) suggested that for study done for Malaysian companies, development of disclosure index has to consider the influenced by the approved accounting standards, national laws and other requirements. SC, Bursa Malaysia, Companies Act, 1965 and Malaysian Accounting Standard Board (MASB) were namely the regulatory bodies to encourage companies to provide more information that required and to enhance understandability of the items disclose in notes to the accounts.

In Malaysia, Haifa and Cooke, Husain et al. and Thompson suggested that the comprehensiveness of disclosed information may closely associate with the conservativeness of accounting methods and full financial disclosure. Since many studies criticized on grading as weighted to the items disclosed Cooke and this study follow alternatively. This objective is based on assuming that there will be a biased towards all items disclosed. UN weighted scoring approach was preferred in study done by. The various features used in the literature, such as number of firms included in the sample, type of firm, listing status, firm's size, used as independent variables to explain correlation with dependent variables. As for the dependent variables concerned, the numbers of disclosure item are normally used. These have contributed to mixed results.

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武汉科技大学城市学院专业论文

This study has constructed new dimension of transparency index. Therefore, the primary objective of the study is to see whether there is a relationship between level of transparency and firms' characteristics. In order to achieve purpose of this study a transparency index is developed. The items used in the development of transparency index were obtained from the financial statements of the companies. The significant of this transparency index is to be as an indication of the level of transparency in the income statements of the companies. This index is also used as a dependent variable in determining firms ?characteristics that influence this index. Hence this study will help to identify areas which improve greater transparency of income statements of listed companies. MATERIALS AND METHODS Model development: This study constructs a transparency index by considering the all-inclusive concept of income. Similarly, this study uses an index to measure transparency of the income statements. According to the accounting requirements and regulations in Malaysia, the types of expenses to disclose are detailed in the Companies Act 1965 and relevant requirement of the accounting standards issued by MASB. Nevertheless, the quality of the income statement could be judged specifically of items reported in the income statements should be disclosed comprehensively on the notes to the accounts. Construction of the transparency index was properly drawn up onto two stages. The first stage was the identification of total expenses as the total amount of selling and administration expenses, distribution expenses, other operating expenses and finance cost.

Selection of these items were done after considering standardized items that were reported in the income statement regardless of whether firms are manufacturing or non-manufacturing. The definition of total expenses is shown below: Total Expenses (TE) = Selling and administration expenses + distribution expenses + other operating expenses + finance cost A major difficulty in determining the total expenses are cost of ambiguous nature of certain expense item disclosure. For example, depreciation expense is not clearly identified as to whether it is in the cost of goods sold, selling and administration expenses and many others. In addition, the cost of sales may also lead to bias for non-manufacturing and trading companies, that is the service industries.

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武汉科技大学城市学院专业论文

Therefore, the item cost of sales or cost of goods sold is excluded from the total expenses (the denominator of the index) figure. Admittedly, this is a major limitation of the income statements transparency index but is unavoidable given the existing income statement disclosures of the companies. In addition, excluding a cost of sales or cost of goods sold avoids the problems of double counting, as companies are required to disclose depreciation expenses. This method of determining total expenses is applied consistently through all the sample firms.

As for the numerator of the index, the total expense disclosed (the numerator) represents the detailed expenses disclosed in the notes to the accounts. In the notes to the account, the most relevant note will be the notes regarding the calculation of profit or loss from operations. The detailed expense item will then be used in calculating the index. In addition to the note regarding profit or loss from operations, other expenses are disclosed elsewhere in the financial statements, for example staff costs, in order to avoid double counting specifically regarding directors remuneration.

Details of the staff costs have to be examined and necessary adjustment will then be made. One difference relating to the determination of detailed expenses item disclosed is with regard to the adjustment for stock and debtors. These items are carefully examined to avoid double counting. The above procedure is used to construct the income statement transparency index for all companies in the sample.

Thus, this is totally different with other measurements of transparency index that are used in the study done by Thompson Corporate Transparency Index (CTI) that measured transparency by looking at the efficiency of process of information dissemination to public. All these variables are tested based on the hypothesis whether it is a significant factor to the level of income statement transparency. Pauline and Mathews suggested that log transformed data should be applied for skewed data set, namely for total assets. Natural log was also applied in this study to the number of shareholders variable, The other reason why the variable are logged is to eliminate outliers that exist within the huge data range from the larger to smaller firm and number of shareholder size.

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武汉科技大学城市学院专业论文

Multi co linearity problem is reduced between highly correlated variables by included only one of them in the equation. Once the first variable is included, the added explanatory power of the second variable will be minimal and its F-statistic will not be large enough to enter the model. These steps are repeated until no more variables are added or removed. RESULTS Table 1 below shows the descriptive analysis concerning income statements. This result fulfills the first objective of the study to determine the level of income statement transparency of firms listed on the Bursa Malaysia.

The highest transparency index is 1.000 which means that the company fully disclosed all expenses reported in the income statement in the notes to the account. Three companies in the sample have perfect scores, namely LPI Capital Bhd, Maybank Bhd and John Hancock Life Insurance (Malaysia) Bhd.

Multi co linearity can distort the standard error of estimate and therefore lead to incorrect conclusions as to which independent variables are statistically significant. This problem, however, will be taken care of by a stepwise multivariate regression analysis. Regression analysis result fulfills second objective of this study which is to see the relationship between level of income statement transparency and firms' characteristics. On the contrary, the results are different with the other researches possible explanation is due to the introduction of disclosure guidelines introduced by the MASB and Bursa Malaysia's listing requirement. Firms will have to obey the disclosure requirement regardless of their characteristics. In addition, firms with a higher number of shareholders normally have implement good corporate governance between the companies. A higher level of disclosure and transparency were then become a company's practices. This is to ensure the users of accounting information get the true view of financial statements and that contribute to the decision made by the investors to invest in their company. This is supported by the fact that the mean of transparency index of companies in the sample of this study is 68%. Therefore, there is greater uniformity in term of the disclosure relating to the income statements.

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