Strategic Management Accounting disclosure, ownership structure, and firm characteristics in Indonesia manufacturing companies

Setianingtyas Honggowati, Rahmawati Rahmawati, Y Anni Aryani, Agung Nur Probohudono

Abstract


Why managers should choose to disclose their information with investors is one of the major issues in accounting research. Because of information asymmetry and the agency problem, disclosure is an important aspect of the modern capital market. This study aims to measure the extent of Strategic Management Accounting (SMA) disclosure and the impact of ownership structure (managerial ownership, foreign ownership, government ownership) and firm characteristics (firm size, leverage, profitability) on SMA practices in annual reports of Indonesia manufacturing companies.  The annual reports of 545 listed companies for 2012–2016 were examined to measure the extent of SMA disclosure and investigate potential determinant factors of SMA disclosure. This study used 42 items of weighted disclosure index, based on international guideline and SMA literature. This study used multiple regression analysis to examine the association between ownership structure, firm characteristics, and SMA disclosure. The results indicate a low extent of SMA disclosure in annual reports of Indonesia manufacturing companies. The average of SMA disclosure rate is only 39.4 percent, which indicates that SMA has not been commonly disclosed in annual reports. Further results indicate that only leverage that has an insignificant effect on the extent of SMA disclosure. The finding regarding SMA disclosure in annual reports should be on concern to regulatory authorities and standard-setters in Indonesia.

JEL Classification: G30, G32, G34

DOI: https://doi.org/10.26905/jkdp.v23i3.3228

 


Keywords


Firm characteristics; Ownership structure; Strategic Management Accounting; Voluntary disclosure

Full Text:

PDF

References


Ahn Vu, K., Tower, G., & Scully, G. (2011). Corporate communication for Vietnamese listed firms. Asian Review of Accounting, 19(2), 125-146. https://doi.org/10.1108/13217341111181069

Akhtaruddin, M., & Haron, H. (2010). Board ownership, audit committees' effectiveness, and corporate voluntary disclosures. Asian Review of Accounting, 18(1), 68-82. https://doi.org/10.1108/13217341011046015

Alhazaimeh, A., Palaniappan, R., & Almsafir, M. (2014). The impact of corporate governance and ownership structure on voluntary disclosure in annual reports among listed Jordanian companies. Procedia-Social and Behavioral Sciences, 129, 341-348. https://doi.org/10.1016/j.sbspro.2014.03.686

AlMaryani, M. A. H., & Sadik, H. H. (2012). Strategic management accounting techniques in Romanian companies: Some survey evidence. Procedia Economics and Finance, 3, 387-396. https://doi.org/10.1016/S2212-5671(12)00169-4

Alnabsha, A., Abdou, H. A., Ntim, C. G., & Elamer, A. A. (2018). Corporate boards, ownership structures and corporate disclosures: Evidence from a developing country. Journal of Applied Accounting Research, 19(1), 20-41. https://doi.org/10.1108/JAAR-01-2016-0001

Amran, A., Bin, A. M. R., & Hassan, B. C. H. M. (2009). Risk reporting. Managerial Auditing Journal. 24(1), 39-57. https://doi.org/10.1108/02686900910919893

An, Y., Davey, H., & Eggleton, I. R. (2011). Towards a comprehensive theoretical framework for voluntary IC disclosure. Journal of Intellectual Capital, 12(4), 571-585. https://doi.org/10.1108/14691931111181733

Baldrige, M. (2013). Criteria for Performance Excellence. National Institute of Standards and Technology (NIST). United States Department of Commerce

Bamber, M., & McMeeking, K. (2010). An examination of voluntary financial instruments disclosures in excess of mandatory requirements by UK FTSE 100 non-financial firms. Journal of Applied Accounting Research, 11(2), 133-153. https://doi.org/10.1108/09675421011069504

Berle, A., & Means, G. (1932), The Modern Corporation and Private Property, Macmillan

Publishers, New York, NY.

Bourveau, T., & Schoenfeld, J. (2017). Shareholder activism and voluntary disclosure. Review of Accounting Studies, 22(3), 1307-1339. https://doi.org/10.1007/s11142-017-9408-0

Bradbury, M. E. (1992). Voluntary disclosure of financial segment data: New Zealand evidence. Accounting & Finance, 32(1), 15-26. https://doi.org/10.1111/j.1467-629X.1992.tb00174.x

Bromwich, M. (1990). The case for strategic management accounting: the role of accounting information for strategy in competitive markets. Accounting, Organizations and Society, 15(1-2), 27-46. https://doi.org/10.1016/0361-3682(90)90011-I

Carlsson-Wall, M., Kraus, K., & Lind, J. (2015). Strategic management accounting in close inter-organizational relationships. Accounting and Business Research, 45(1), 27-54. https://doi.org/10.1080/00014788.2014.965128

Chen, C., Martin, X., Roychowdhury, S., Wang, X., & Billett, M. T. (2018). Clarity begins at home: Internal information asymmetry and external communication quality. The Accounting Review, 93(1), 71-101. https://doi.org/10.2308/accr-51842

Chow, C. W., & Wong-Boren, A. (1987). Voluntary financial disclosure by Mexican corporations. The Accounting Review, 533-541.

Chu, C. I., Chatterjee, B., & Brown, A. (2013). The current status of greenhouse gas reporting by Chinese companies. Managerial Auditing Journal. 28 (2), 114- 139. https://doi.org/10.1108/02686901311284531

Clarkson, P. M., Overell, M. B., & Chapple, L. (2011). Environmental reporting and its relation to corporate environmental performance. Abacus, 47(1), 27-60.

https://doi.org/10.1111/j.1467-6281.2011.00330.x

Cuganesan, S., Dunford, R., & Palmer, I. (2012). Strategic management accounting and strategy practices within a public sector agency. Management Accounting Research, 23(4), 245-260. https://doi.org/10.1016/j.mar.2012.09.001

Depoers, F. (2000). A cost-benefit study of voluntary disclosure: Some empirical evidence from French listed companies. European Accounting Review, 9(2), 245-263. https://doi.org/10.1080/09638180050129891

Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86(1), 59-100. https://doi.org/10.2308/accr.00000005

Dixon, R. & Smith (1993). Strategic management accounting. Omega, 21(6), 605-618. https://doi.org/10.1016/0305-0483(93)90003-4

Dobler, M., Lajili, K., & Zéghal, D. (2011). Attributes of corporate risk disclosure: An international investigation in the manufacturing sector. Journal of International Accounting Research, 10(2), 1-22. https://doi.org/10.2308/jiar-10081

Ebrahim, A., & Fattah, T. A. (2015). Corporate governance and initial compliance with IFRS in emerging markets: The case of income tax accounting in Egypt. Journal of International Accounting, Auditing, and Taxation, 24, 46-60. https://doi.org/10.1016/j.intaccaudtax.2015.02.003

Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of accounting and public policy, 22(4), 325-345. https://doi.org/10.1016/S0278-4254(03)00037-1

Ferreira, D., & Rezende, M. (2007). Corporate strategy and information disclosure. The RAND Journal of Economics, 38(1), 164-184. https://doi.org/10.1111/j.1756-2171.2007.tb00050.x

Financial Accounting Standards Board (FASB). 2010. Concept Statement No.8. Retrieved from: https://www.fasb.org/resources/ccurl/515/412/Concepts%20Statement%20No%208.pdf. March 10, 2017.

Foster, G. (1986). Financial statement analysis. Englewood Cliffs, N.J.: Prentice-Hall.

Ghazali, N. A. M., & Weetman, P. (2006). Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis. Journal of International Accounting, Auditing, and Taxation, 15(2), 226-248. https://doi.org/10.1016/j.intaccaudtax.2006.08.001

Gisbert, A., & Navallas, B. (2013). The association between voluntary disclosure and corporate governance in the presence of severe agency conflicts. Advances in Accounting, 29(2), 286-298. https://doi.org/10.1016/j.adiac.2013.07.001

Glaum, M., Baetge, J., Grothe, A., & Oberdörster, T. (2013). Introduction of international accounting standards, disclosure quality and accuracy of analysts' earnings forecasts. European Accounting Review, 22(1), 79-116. https://doi.org/10.1080/09638180.2011.558301

Global Reporting Initiative. (2013). G4 Sustainability Reporting Guidelines (G4 Guidelines). Retrieved from: https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf. March 10, 2017

Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance, and disclosure in Malaysian corporations. Abacus, 38(3), 317-349. https://doi.org/10.1111/1467-6281.00112

Hassan, M. K. (2009). UAE corporations-specific characteristics and level of risk disclosure. Managerial Auditing Journal, 24(7), 668-687. https://doi.org/10.1108/02686900910975378

Healy, P. M., & Palepu, K. G. (1995). The challenges of investor communication The case of CUC International, Inc. Journal of Financial Economics, 38(2), 111-140.

https://doi.org/10.1016/0304-405X(94)00814-H

Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of accounting and economics, 31(1-3), 405-440. https://doi.org/10.1016/S0165-4101(01)00018-0

Ho, S. S., & Wong, K. S. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing, and Taxation, 10(2), 139-156. https://doi.org/10.1016/S1061-9518(01)00041-6

Honggowati, S., Rahmawati, R., Aryani, Y. A., & Probohudono, A. N. (2017). Corporate governance and strategic management accounting disclosure. Indonesian Journal of Sustainability Accounting and Management, 1(1), 23-30. https://doi.org/10.28992/ijsam.v1i1.24

Hoque, Z. 2006. Strategic Management Accounting. 2nd Edition. Pearson Higher Education.

Hossain, M., Perera, M. H. B., & Rahman, A. R. (1995). Voluntary disclosure in the annual reports of New Zealand companies. Journal of International Financial Management & Accounting, 6(1), 69-87. https://doi.org/10.1111/j.1467-646X.1995.tb00050.x

Hummel, K., & Schlick, C. (2016). The relationship between sustainability performance and sustainability disclosure–Reconciling voluntary disclosure theory and legitimacy theory. Journal of Accounting and Public Policy, 35(5), 455-476. https://doi.org/10.1016/j.jaccpubpol.2016.06.001

Indonesia Stock Exchange. (2017). Listed Companies dan Financial Statement & Annual Report. Retrieved from: http://www.idx.co.id/ May 6, 2017.

International Accounting Standards Board. (2010). Management Commentary: A Framework for Presentation. London: International Accounting Standards Board.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305-360.

https://doi.org/10.1016/0304-405X(76)90026-X

Jiang, H., & Habib, A. (2009). The impact of different types of ownership concentration on annual report voluntary disclosures in New Zealand. Accounting Research Journal, 22(3), 275-304. https://doi.org/10.1108/10309610911005590

Kent, P., & Zunker, T. (2017). A stakeholder analysis of employee disclosures in annual reports. Accounting & Finance, 57(2), 533-563. https://doi.org/10.1111/acfi.12153

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1-2), 3-27.

https://doi.org/10.1016/S0304-405X(00)00065-9

Langfield-Smith, K. (2008). Strategic management accounting: how far have we come in 25 years?. Accounting, Auditing & Accountability Journal, 21(2), 204-228. https://doi.org/10.1108/09513570810854400

Lev, B. (1992). Information disclosure strategy. California Management Review, 34(4), 9-32. https://doi.org/10.2307/41166701

Ma, Y., & Tayles, M. (2009). On the emergence of strategic management accounting: an institutional perspective. Accounting and Business Research, 39(5), 473-495. https://doi.org/10.1080/00014788.2009.9663379

Mangena, M., & Tauringana, V. (2007). Disclosure, corporate governance and foreign share ownership on the Zimbabwe stock exchange. Journal of International Financial Management & Accounting, 18(2), 53-85. https://doi.org/10.1111/j.1467-646X.2007.01008.x

Martínez-Ferrero, J., Rodríguez-Ariza, L., García-Sánchez, I. M., & Cuadrado-Ballesteros, B. (2018). Corporate social responsibility disclosure and information asymmetry: the role of family ownership. Review of Managerial Science, 12(4), 885-916.

https://doi.org/10.1007/s11846-017-0232-5

Martínez‐Ferrero, J., Ruiz‐Cano, D., & García‐Sánchez, I. M. (2016). The causal link between sustainable disclosure and information asymmetry: The moderating role of the stakeholder protection context. Corporate Social Responsibility and Environmental Management, 23(5), 319-332. https://doi.org/10.1002/csr.1379

Meek, G. K., Roberts, C. B., & Gray, S. J. (1995). Factors influencing voluntary annual report disclosures by US, UK, and continental European multinational corporations. Journal of International Business Studies, 26(3), 555-572. https://doi.org/10.1057/palgrave.jibs.8490186

Modell, S. (2012). Strategy, political regulation and management control in the public sector: institutional and critical perspectives. Management Accounting Research, 23(4), 278-295. https://doi.org/10.1016/j.mar.2012.05.001

Morris, R. D. (1987). Signaling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47-56. https://doi.org/10.1080/00014788.1987.9729347

Morris, R. D., & Tronnes, P. C. (2018). The determinants of voluntary strategy disclosure: An international comparison. Accounting Research Journal, 31(3), 423-441. https://doi.org/10.1108/ARJ-10-2015-0126

Ng, E. J., & Koh, H. C. (1994). An agency theory and probit analytic approach to corporate non-mandatory disclosure compliance. Asia-Pacific Journal of Accounting, 1(1), 29-44. https://doi.org/10.1080/10293574.1994.10510464

Nixon, B., & Burns, J. (2012). The paradox of strategic management accounting. Management Accounting Research, 23(4), 229-244. https://doi.org/10.1016/j.mar.2012.09.004

Noreen, E. (1988). The economics of ethics: A new perspective on agency theory. Accounting, Organizations and Society, 13(4), 359-369. https://doi.org/10.1016/0361-3682(88)90010-4

Ntim, C. G., Opong, K. K., & Danbolt, J. (2012). The relative value relevance of shareholder versus stakeholder corporate governance disclosure policy reforms in South Africa. Corporate Governance: An International Review, 20(1), 84-105.

https://doi.org/10.1111/j.1467-8683.2011.00891.x

Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62. https://doi.org/10.1016/j.mar.2016.02.001

Peters, G. F., & Romi, A. M. (2013). Does the voluntary adoption of corporate governance mechanisms improve environmental risk disclosures? Evidence from greenhouse gas emission accounting. Journal of Business Ethics, 125(4), 637-666. https://doi.org/10.1007/s10551-013-1886-9

Plumlee, M., Brown, D., Hayes, R. M., & Marshall, R. S. (2015). Voluntary environmental disclosure quality and firm value: Further evidence. Journal of Accounting and Public Policy, 34(4), 336-361. https://doi.org/10.1016/j.jaccpubpol.2015.04.004

Probohudono, A. N. (2012). A Comparative Analysis Of Voluntary Risk Disclosures. Doctor of Philosophy Ph.D. thesis. Curtin University, School of Accounting. Curtin University.

Rajab, B., & Schachler, M. H. (2009). Corporate risk disclosure by UK firms: trends and determinants. World Review of Entrepreneurship, Management, and Sustainable Development, 5(3), 224-243. https://doi.org/10.1504/WREMSD.2009.026801

Ross, S. A. (1979). Disclosure regulation in financial markets: Implications of modern finance theory and signaling theory. Issues in financial regulation, 5(1979), 177-202.

Mokhtar, S. E., & Mellett, H. (2013). Competition, corporate governance, ownership structure, and risk reporting. Managerial Auditing Journal, 28(9), 838-865.

https://doi.org/10.1108/MAJ-11-2012-0776

Samaha, K., & Dahawy, K. (2010). An empirical analysis of corporate governance structures and voluntary corporate disclosure in volatile capital markets: The Egyptian experience. International Journal of Accounting, Auditing and Performance Evaluation, 7(1-2), 61-93. https://doi.org/10.1504/IJAAPE.2011.037726

Sieber, T., Weißenberger, B. E., Oberdörster, T., & Baetge, J. (2014). Let’s talk strategy: the impact of voluntary strategy disclosure on the cost of equity capital. Business Research, 7(2), 263-312. https://doi.org/10.1007/s40685-014-0010-z

Simmonds, K. (1981). Strategic management accounting. Management Accounting, 59, 26–29.

Thorne, L., S. Mahoney, L., & Manetti, G. (2014). Motivations for issuing standalone CSR reports: A survey of Canadian firms. Accounting, Auditing & Accountability Journal, 27(4), 686-714. https://doi.org/10.1108/AAAJ-07-2013-1393

Tillmann, K., & Goddard, A. (2008). Strategic management accounting and sense-making in a multinational company. Management Accounting Research, 19(1), 80-102. https://doi.org/10.1016/j.mar.2007.11.002

United Nation Global Compact (2017). The Ten Principles of the UN Global Compact. Retrieved from: https://www.unglobalcompact.org/what-is-gc/mission/principles. March 10, 2016.

Uyar, A., & Kılıç, M. (2012). Value relevance of voluntary disclosure: evidence from Turkish firms. Journal of Intellectual Capital, 13(3), 363-376. https://doi.org/10.1108/14691931211248918

Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Englewood Cliffs, N.J.: Prentice-Hall.




DOI: https://doi.org/10.26905/jkdp.v23i3.3228

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0