The voluntary disclosure of internet financial reporting (IFR) in an emerging economy: a case of digital Bangladesh
| Pages | 17-42 |
| DOI | https://doi.org/10.1108/15587891211190688 |
| Published date | 13 January 2012 |
| Date | 13 January 2012 |
| Author | Mohammad Nurunnabi,Monirul Alam Hossain |
| Subject Matter | Strategy |
The voluntary disclosure of internet
financial reporting (IFR) in an emerging
economy: a case of digital Bangladesh
Mohammad Nurunnabi and Monirul Alam Hossain
Abstract
Purpose – The present study seeks to paint the current state of voluntary disclosure of internet financial
reporting (IFR) in Bangladesh as an example of an emerging economy and to investigate empirically
some company characteristics as determinants of such practice.
Design/methodology/approach – Using a sample of 83 listed companies in Bangladesh in the year
2009 and the disclosure index of Deller et al., Marston, Xiao et al. and Marston and Polei and comments
from the users and investors of Bangladesh, the study employs statistical analysis to investigate the
association between a number of company characteristics and the extent of voluntary disclosure of IFR.
Findings – The findings revealed that only 29.12 percent (83) companies had web sites out of the 285
listed companies and only 33.34 percent (28) companies’ provided financial information. Out of seven
variables, only big audit firms and non-family ownership variables were significantly associated with the
levels of voluntary disclosure. Another important result revealed that despite the mandatory
requirements of having audit committee in Bangladesh, the companies without the audit committee
were disclosing voluntary information more and it raised the question on the lack of regulatory
enforcement in Bangladesh.
Research limitations/implications – The scope of this study is limited to a single country; it would be
interesting to replicate this study to a group of emerging countries which have many similarities to the
Bangladesh environment.
Originality/value – To the best of the authors’ knowledge, no studies have been conducted on IFR in a
South Asian emerging country,in particular Bangladesh. The study also is the first of its kind to examine
the whole population of a period in any country which enhances contribution to IFR literature. Unlike the
prior studies conducted in emerging countries, the study contributes not only to the present state of IFR
by the listed companies in Bangladesh but also the connectivity problem between the dream and reality
of the digital Bangladesh concept. The study also finds that the companies’ IFR practices are not
influenced by ‘‘Digital Bangladesh’’ concept.
Keywords Internet financial reporting, Voluntary disclosure, Emerging economies, Bangladesh,
Emerging markets, Information disclosure
Paper type Research paper
1. Introduction
Appropriate disclosure of financial data relevant to users is always a key issue in financial
reporting (Prodhan, 1986). At present, a significant number of companies in emerging
economies are making financial reporting through their web sites. Most of the recent
research provides evidence of the influence of the internet on financial disclosure practices
in both developed and emerging countries. During the last decade, the influence of the
internet on financial disclosure in emerging countries increased. Several IFR studies have
been carried out in developed countries (e.g. Marston and Leow, 1998; Pirchegger and
Wagenhofer, 1999; Ashbaugh et al. 1999; Brennan and Hourigan, 2000; Ettredge et al.,
2002; Marston, 2003; Oyelere et al. 2003; Bollen et al., 2006; Bonso
´n and Escobar, 2006;
Abdelsalam et al., 2007; Despina and Demetrios, 2009) and there is a dearth of research on
IFR practices of firms located in the context of emerging economies like Bangladesh
DOI 10.1108/15587891211190688 VOL. 6 NO. 1 2012, pp. 17-42, QEmerald Group Publishing Limited, ISSN 1558-7894
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JOURNAL OF ASIA BUSINESS STUDIES
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PAGE 17
Mohammad Nurunnabi is
Senior Lecturer in
Accounting at the Business
School, Edge Hill University,
Ormskirk, UK.
Monirul Alam Hossain is
Professor in Accounting at
East West University,
Dhaka, Bangladesh.
Received: 29 November 2010
Accepted: 17 May 2011
(e.g. Xiao et al., 2004; Momany and Al-Shorman, 2006; Al-Shammari, 2007; Mohamed et al.,
2009; Mohamed and Oyelere, 2009; Desoky, 2009).
In November 1999, the International Accounting Standards Committee (IASC), now the
IASB, published a commissioned study: Business Reporting on the Internet. This report
reviewed the development of internet financial reporting as well as non-financial corporate
performance data (Momany and Al-Shorman, 2006). Amongst other matters, the report
proposed the short-term need for a code of conduct for internet financial reporting as well as
a longer-term review of the need for more specific accounting standards related to the
electronic release of information (IAS, 1999; cited in Momany and Al-Shorman, 2006). In
2002, the International Federation of Accountants released a free ten-page report that
provides guidance for companies seeking to use the internet to communicate supplemental
financial information to customers, stakeholders, analysts, and others via their corporate
web site where the report suggests control considerations and implementation strategies to
ensure the integrity of financial information on the web (Brune, 2002). Researchers like Xiao
et al. (2004) and Gowthorpe (2004) argued that financial reporting in the near future is
expected to move from traditional printed Annual Reports to using the internet as the main
source of primary information. As an increasing number of companies all over the world are
using the internet for financial disclosure, it is high time to think for an International Internet
Accounting Standards (IIASs) for harmonization of financial reporting practices.
The study empirically examines the extent of Internet Financial Reporting by the listed
companies in Bangladesh. The study develops a disclosure index of 56 voluntary items of
information based on the prior studies. After deriving several hypotheses and company
characteristics from similar prior studies, the association between the extent of disclosure of
the Internet Financial Reporting and these company characteristics will then be measured
using multiple regression models. Our study provides three important contributions. First, we
provide insight into IFR in an emerging economy, Bangladesh. Second, we try to connect
Internet Financial Reporting disclosure and ‘‘Digital Bangladesh’ ’ concept to identify the
dream or reality. Third, we have included two new variables to examine the extent of IFR
disclosure and its association with audit committee and ownership diffusion. With the
inclusion of this introduction, the study has been organized into five sections. The second
section provides an understanding of the Digital Bangladesh concept. The literature review,
theories and hypotheses development are discussed in the third section. The fourth section
contains research methodology and findings and analyses are in the fifth section. The final
section contains conclusion and limitations of the study.
2. Digital Bangladesh concept
The present government, led by the Awami league, made the commitment and pledge
towards the ‘‘Digital Bangladesh’’ concept. However, the concept is very vague and ‘the
government officials did not clearly answer the question, ‘what is digital Bangladesh’’’ ((The)
Financial Express, 2009). In general, to digitize Bangladesh, a series of reforms is needed in
almost every sector. But, this is difficult for a country greatly affected by climate change and
with a high poverty level. The present study seeks to answer the following questions of the
listed companies in Bangladesh – are they compatible with the digital Bangladesh concept
– is the concept just a dream? The study also explores the dream and reality of the digital
Bangladesh concept, which may link between the organizational behavior in terms of
technology adoption, disclosure and the digital concept.
The Transparency International Bureau stated that hiding information is a common
phenomenon in Bangladesh and that companies are no exception. To be transparent and
more accountable to stakeholders, the companies need to provide detailed information. It is
quite shocking that the stock market crashes in 1996 and 2011 also provide the same picture
of the traditional culture of not providing enough information to investors and the insider
information are key to gain abnormal returns (Nurunnabi et al., (forthcoming). The stock
market in Bangladesh requires companies to publish their annual report in print and
therefore, the companies do not publish any digitized report. The users of internet are
increasing (see Figure 1) but for a company to begin the practice of digitized reports is a
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