The study was aimed at evaluating the extent of incorporation of disclosure provisions in the Malawian Codes of corporate governance in line with the OECD principles of corporate governance. The study used content analysis to examine the Codes i.e. the "Old Code", "Revised Code" and "RBM Code". An Incorporation index was computed based on a disclosure checklist. The results suggest low level of incorporation of disclosure provisions both in the Old Code (0.35) and the Revised Code (0.30). Besides, the results indicate that the revision of the Code did not improve the disclosure provisions but rather worsen them. On the other hand, the study found high level of incorporation in the RBM Code for banks (0.70). The results indicate that more work is still needed to improve disclosure provisions in the Revised Code, thus the study recommends a comprehensive review of the Revised Code to march to international standards.
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4201April ; 5(1) No. 5,Vol. International Journal of Business and Social Science
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A Review of Disclosure Provisions in Malawian Codes of Corporate Governance
Andrew Munthopa Lipunga
Department of Accountancy
University of Malawi - The Polytechnic
Private Bag 303, Chichiri, Blantyre 3, Malawi
Abstract
The study was aimed at evaluating the extent of incorporation of disclosure provisions in the Malawian Codes of
corporate governance in line with the OECD principles of corporate governance. The study used content analysis
to examine the Codes i.e. the "Old Code", "Revised Code" and "RBM Code". An Incorporation index was
computed based on a disclosure checklist. The results suggest low level of incorporation of disclosure provisions
both in the Old Code (0.35) and the Revised Code (0.30). Besides, the results indicate that the revision of the
Code did not improve the disclosure provisions but rather worsen them. On the other hand, the study found high
level of incorporation in the RBM Code for banks (0.70). The results indicate that more work is still needed to
improve disclosure provisions in the Revised Code, thus the study recommends a comprehensive review of the
Revised Code to march to international standards.
Keywords: Corporate governance, corporate governance disclosures, incorporation index
1. Introduction
According to ROSC (2007) corporate governance (CG), refers to the structures and processes for the direction and
control of companies. Bhasin (2012) stated that CG involves a set of relationships between a corporation's
management, its board, its shareholders and other stakeholders. Solomon and Solomon (2004) cited in Onakoya et
al. (2012) defined it as the system of checks and balances, both internal and external to companies, which ensures
that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all
areas of their business activity. At the moment CG has no single acceptable meaning (Agamah, 2013). However
there is consensus of its importance to the organisations and the entire economy. Furthermore there is general
agreement that it is premised on the pillars of integrity, probity, independence, accountability, responsibility,
fairness and transparency. Besides, it is acknowledged that good CG contributes to sustainable economic
development by enhancing the performance of companies and increasing their access to outside capital (ROSC,
2007). In relation to developing economies, Samaha et al. (2012) pointed out that CG helps them to realise high
and sustainable rates of growth, increase confidence in the national economy, deepen the capital market and
increase its ability to mobilise savings. On the other side, weak CG frameworks reduce investor confidence, and
discourage outside investment (ROSC, 2007). On company level, poor CG is recognised as a route to
organizational failure (Biobele et al., 2013). Thus, CG is an issue of achieving sustainable competitive advantage
(Biobele et al., 2013).
As a result, countries are adopting CG frameworks. However, resource-constraints forces other countries
especially in developing world either to adopt fully or develop their CG frameworks based on already existing CG
frameworks of other countries or international organisations. The adoption or development involves minor or
major modifications to suit the local context. According to Mulili and Wong (2011) CG must be based on factor
unique to a country such as the legal and financial system, corporate ownership structures, culture and economic
circumstances. However, the process of modification has its own dangers, one of it being dilution of the basic
standards. The expectation is that the modifications should be made solely with the view of matching the CG to
local environment whilst upholding or strengthen the basic CG standards.
The study focuses on a country Malawi which recently revised her Code. The revision was necessitated upon
realisation that the "Old Code" though drawn from internationally recognised codes was wanting. That rendered it
less useful as companies continued to make reference to the internationally recognised codes instead of it
(Institute of Directors of Malawi, 2010). This was a clear indication that local companies realise the importance of
credibility of a Code they use.
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Generally it is acknowledge that due to globalisation credible CG disclosures must reflect the international
perspective (Biobele et al., 2013). Thus the purpose of the study was to empirically evaluate extent of
incorporation of disclosure provisions in the current CG codes of Malawi in line with the disclosure provisions of
OECD principles of CG. The study was significant as it presents an empirical evaluation of one of the important
pillars of CG which is also pervasive as it impacts on the other pillars. The study informs the policy makers of the
gaps that needs filling in order for Malawi to have a robust CG systems. Furthermore it contributes to literature on
the CG from developing countries, moreover from Africa. Generally, despite the increasing body of academic
research with regard to CG (ROSC, 2007), much is limited to developed countries, and relatively much less from
developing and emerging nations and Africa (Samaha et al., 2012; Okeahalam, 2004; Nganga et al., 2003).
Besides, Okeahalam (2004) recognised an urgent need to embark on meaningful analysis and development of
policy on CG in Africa. The rest of the paper is structured as follows. The second section briefly discusses the CG
developments in Malawi, followed by the review of importance of CG disclosure as provided by extant literature
in section three. Section four discusses the research methodology employed and section five presents the findings
and the resultant discussion. Section six gives concluding remarks and recommendations.
2. Corporate governance developments in Malawi
This section traces the important landmarks achieved in Malawi over the years in relation to CG. Generally, in
spite of the fact that CG originated in the nineteenth century (Fletcher, 1996 and Vinten, 2001cited in Mulili and
Wong, 2011), according to Parker (1996) cited in Mulili and Wong (2011) the concept began to be used and
spoken about more commonly in the 1980s. However, the first ever open and meaningful discussion on CG in
Malawi took place in 1997 at a conference that was organised by the Society of Accountants in Malawi
(SOCAM) (SOCAM, 2001). The participant appealed for the formation of CG committee to broadly look at
issues of CG in Malawi, in process come up with the CG code and further consider the necessity of establishing
an Institute of Directors (SOCAM, 2001). As a result, CG taskforce was constituted in 1998. Consultations and
discussions followed that resulted in the development and subsequent adoption of the Code of best practice for
CG in Malawi (hereafter referred as the Old Code) in 2001. It is referred as the Old Code as it has since been
replaced by a new revised code.
According to the framers, the Old Code was drawn from recognised codes of CG such as the South African King
Report, the Kenyan Principles and Sample Code and the Guidelines of the Commonwealth Association for CG
(SOCAM, 2001). The Old Code was voluntary, principle-based and was intended to be applicable to all
enterprises in Malawi. The basis of the code was the recognition that society was demanding greater
accountability and transparency from institutions and enterprises regarding their affairs (SOCAM, 2001).
Besides, another important landmark was the establishment of the Institute of directors of Malawi in 2003. The
institute's primary aim was the promotion of good CG in Malawi (www.iod.mw). Its two major objectives include
being the custodian of the Malawian CG code and promoter of its compliance and of effective CG generally i.e.
the proper function of the board of directors and other senior managers in companies of all sizes (www.iod.mw).
Other objectives are educating directors and senior managers of their legal, moral and general rights, duties and
responsibilities; advancing competence and knowledge of its members; taking an effective interest in legislation
in order to ensure preservation of basic commercial freedoms and rights and maintenance of conducive climate for
sustainable economic growth; providing effective voice for directors and executives in public affairs; and
upholding the concepts of formal business entity and its importance to free enterprising (www.iod.mw).
In spite of its adoption, the Old Code was not widespread accepted. This was manifested by the continual
reference to the compliance with foreign codes such as King and Cadbury Code by companies in their annual
reports including in the listings requirements issues by Malawi Stock Exchanges in 2008 (Institute of Directors of
Malawi, 2010; MSE, 2008). Undoubtedly this was an indication that the code lacked credibility and thus a need
for a stronger code (Institute of Directors of Malawi, 2010). This was also confirmed by a report on observance of
standards and codes issued at the conclusion of a country assessment carried out by the World Bank in 2007. The
report (ROSC, 2007) highlighted that one of the major obstacles facing Malawi was the existing laws and
regulations (including the Code of CG) which needed harmonisation and updating. Thus ROSC (2007)
recommended: (1) a comprehensive review of the Companies Act and updating of the Code of CG; (2)
incorporation into the Code of CG explicit protection against unfair related party transactions; (3) revision of the
non-financial disclosure framework for listed companies; and (4) swift action by the government to strengthen the
CG framework for parastatal companies.
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Following up on the recommendations the Institute of Directors of Malawi issued the updated Malawi Code II
(hereafter referred as the Revised Code) in 2010. The framers indicated that the revision of the Code was the first
step; the next step will involve development of sectoral specific Codes (Institute of Directors of Malawi, 2010).
As such, the revised Code was intended to contain more general provisions as relevant specific provisions will be
made in the sector specific Codes. The Revised Code is principle-based and voluntary and was the primary
research object of the study.
Besides, another important CG development was the issuance of the CG guidelines for Malawian banks (hereafter
referred as the RBM Code) in 2010 by the Reserve Bank of Malawi (RBM). The RBM Code is principle-based;
however unlike the others it is mandatory. According to Reserve Bank Malawi (2010) the RBM Code was issued
in lieu of directive in accordance with the Banking Act, 1989. At the moment, in Malawi there are two codes in
force; the Revised Code and the RBM Code.
3. Importance of Corporate governance disclosure
The concept of CG is currently acknowledged to play an important role in the management of organizations
(Mulili and Wong, 2011). According to Onakoya et al. (2012) the overall effect of good CG should be to
strengthen investor's confidence in the economy of the country. Mulyadi and Anwar (2011) posited that good
corporate disclosure is one of the best measures for the three principles of good CG namely transparency,
accountability, and responsibility. In fact according to Wong et al. (2010) the whole rationale of CG includes the
concept of disclosure or transparency, while Bhasin (2012) posited that the timely disclosure is core to good CG.
The disclosures bear testimony of CG systems in place and gives opportunity to the external stakeholders to
assess it. It is the results of assessment that strengthen the confidence of the stakeholders. Thus, CG framework
without disclosure stipulations is incomplete and cannot serve as an effective tool. As such CG framework should
ensure timely and accurate disclosure of all material matters regarding the corporation, including the financial
situation, performance, ownership, and governance of the company (OECD, 2004). In agreement Sternberg's
(2004) cited in Agamah (2013) posited that effective CG takes place when directors (and employees and other
agents) are held accountable for their conduct and the use of the company's resources, through the use of
directors' powers and duties; periodic reporting, and timely and accurate disclosures to shareholders. The
importance of disclosure and the awareness of the same are manifested by the inclusion of transparency/disclosure
section in CG codes worldwide, with clear stipulations of what must be disclosed to the stakeholders. Besides
within the other sections, disclosure provisions are also imbedded. This is an apparent recognition that
stakeholders not only require the implementation of sound CG but they are also demand clear disclosures on
governance (Biobele et al., 2013).
CG disclosures generally have far-reaching impact on the whole CG system. Illustrating the pervasiveness of
disclosure on the pillars of transparency, accountability and responsibility, Mulyadi and Anwar (2011) posited
that: "By issuing a good corporate disclosure, a corporation provides important and relevant information for
stakeholder (transparency), being accountable of their performance from financial report/financial
statement (accountability), and also follow the regulation that public company required to submit their
report to capital market supervisory board (responsibility)."
CG disclosures are essential both to the organisation and its stakeholders. They act as preventive measures of
future problems by requiring increased transparency market discipline is imposed earlier and more effectively
(Hossain, 2008). Furthermore, a credible CG disclosure is vital for more efficient allocation of resources
(Hossain, 2008; Biobele et al., 2013). On the other hand, the absence of CG disclosures dissuades investment and
capital inflow, affects organisations' total assets, patronages for their goods and services and accruable profits
(Biobele et al., 2013). This was confirmed by a study of Mulyadi and Anwar (2011) who were attempting to
answer whether corporate disclosure matter to investors. They concluded that good CG matters to investors when
they view a good corporate disclosure as an element of their investment decision. Apparently in the current era of
corporate scandals disclosures are essential to decision-making, as observed by Bhasin (2012) disclosure enables
the shareholders to evaluate the management's performance by observing how efficiently the management is
utilising the corporation's resources in the interest of the principal.
Finally, Bhasin (2012) observed that corporate disclosure is evidently a very important aspect of CG as
meaningful and adequate disclosure enhances good CG.
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Thus, Onakoya et al. (2012) in attempting to capture all essential features of CG summarised that CG is about
building credibility, ensuring transparency and accountability as well maintaining an effective channel of
information disclosure that would foster good corporate performance.
4. Research methodology
The study involved evaluation of disclosure provisions in the current Malawian Codes i.e. the Revised Code and
RBM Code, in line with the disclosure provisions of the OECD principles of CG. The Old Code was also
evaluated to measure the impact of the revision in improving the disclosure provisions. The OECD framework
was used consistent with ROSC (2007) which was also a major influence and basis of the revision of the Old
Code. OECD framework also reflects internationally recognised principles of CG. TABLE 1 presents the
disclosure provisions of the OECD principles of CG as provided in a section called "disclosure and transparency".
As can be noted the provisions are divided into eight (8) disclosure categories; financial and operating results,
company objectives, board and remuneration, related party transactions, issues regarding employees and other
stakeholders, governance structure and policies, major share ownership and voting rights, and foreseeable risk
factors. These eight (8) categories are further subdivided into twenty seven (27) disclosure items.
Disclosure Provisions Checklist
A. The financial and operating results of the
company
E. Issues regarding employees and other
stakeholders.
Financial statements including the notes
Management/Employee relations
Management's discussion and analysis
Relations with other stakeholders e.g. creditors,
suppliers, local communities
F. Governance structures and policies
Company's governance structure and polices
Procedures for shareholder meetings
C. Board and Remuneration
G. Major share ownership and voting rights.
board members; qualifications,
age, experience Major shareholders
Independence status of members
Directorships in other companies
Remuneration policy for members of
key executives Cross shareholding relationships
Disclosure of remuneration on individual basis
D. Related party transactions
H. Foreseeable risk factors.
Details of transactions involving major
shareholders and board members, key executives
(or their close family, relations) Risk management systems
The evaluation was done using content analysis based on the disclosure provision checklist (TABLE 1). The
analysis process was carried out in three stages; (1) checking if the particular item was mentioned anywhere in the
particular Code; (2) if mentioned, checking whether it was provided as a disclosable item; and then (3) further
check whether vehicle of its disclosure was specified. The Analysis was based on understanding that an item of
disclosure can be incorporated within the code without any explicit indication that it should be disclosed by
compliant organisations. Furthermore, it is possible to provide that it should be disclosed, without providing
where and how it should be disclosed. The study considered full incorporation to include (1) recognition of an
item within the CG Code, (3) provision as a disclosable item, (3) specific stipulation of the vehicle of disclosure.
The scoring methodology was used is consistent with other related studies (Hossain, 2008; Bhasin, 2012; Biobele
et al., 2013). Thus, if the item is merely mentioned in the particular Code it was awarded a score of '1' or '0' if
not. If it was mentioned and provided as a disclosable item, a further score of '1' was awarded.
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Furthermore, if the vehicle for the disclosure was specified an additional score of '1' was awarded. Thus the
maximum total score for each item on the checklist was '3' and of the entire code, "81". To measure the extent of
incorporation, an incorporation index was thus calculated using a model which was employed by Boolaky (2011):
=
Where: = Total Incorporation Index
= Total actual score
= Maximum score
Furthermore, to measure the incorporation gap an incorporation gap index was calculated. The Incorporation gap
index obtained by taking actual incorporation score from 1 (Boolaky, 2011), thus consistent with Boolaky (2011)
the following model was used:
= 1 − ( =
)
Finally to measure the impact of the revision of the code, the incorporation index of the Old Code was subtracted
from that of the Revised Code on the item by item basis and also on a Code basis (Boolaky, 2011). The expected
sign was positive (+) indicating improvement in the incorporation of the disclosure provisions.
5. Results and discussion
This section is divided into two; part one is the documentation of the disclosure provisions contained in the three
Codes under the study, while part two provides the results of analysis of the levels of incorporation using the
incorporation index and the incorporation gap index.
5.1 Review of the corporate governance codes
5.1.1 Old code
The review of the Old Code indicated that the Code regarded disclosure as essential and recognised the annual
report as the main vehicle for CG disclosures. Furthermore the Code seems to recognise the director's report
within the annual report as an appropriate location. Thus is stipulated issuance of a directors' report within annual
report (p. 6). In recognising the importance of the disclosure to the society at large, the Code provided that
communication by the organisations must be made in the context that society that was demanding greater
transparency and accountability from corporations regarding their non-financial affairs including, for example,
employment policies and environmental issues (p. 6).
The Code further recognised relevance and reliability as important qualities of the disclosure, thus it stipulated
that the reports should be clear and succinct, balanced, objective, easy to understand and should include all the
relevant information that may be useful to investors (p. 6). The Code also recognised the directors to be
responsible for reporting, thus it provided that the directors should report on the following matters in their annual
report (p. 6 & 7):
a) The directors' responsibility to prepare financial statements that show a true and fair view of the
enterprise's state of affairs as at the end of the financial year and the profit or loss for that period.
b) The maintenance of adequate accounting records and an effective system of internal controls.
c) The consistent use of appropriate accounting policies supported by reasonable and prudent judgements
and estimates.
d) Adherence with applicable accounting standards or, if there has been any departure in the interests of
fair presentation, it must not only be disclosed and explained but also quantified.
e) That there is no reason to believe the business will not be a going concern in the year ahead or an
explanation of any reasons otherwise.
f) The Code has been adhered to or, if not, in what respects there has not been adherence.
Furthermore in terms of remuneration the Code provided for "a separate, full and clear disclosure in the annual
report of the aggregate amount of the executive and non-executive directors' earnings and benefits (p. 5). Besides,
the Code recognised the importance of annual general meeting for the shareholders to freely interact with the
directors (p. 6).
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5.1.2 The Revised Code
The review of the Revised Code indicated also that annual report is still regarded as the vehicle for disclosure and
within it the director's report as the main location. The Code also recognised the current demand of greater
transparency, accountability and responsibility from organisations by the society and further requires the
organisations to consider making regular, timely, balanced and understandable statements about their activities,
performance and future prospects (p. 23). The Code entrust the board with ensuring that the integrated reporting
by the organisation is accurate and truthful, at the time of disclosure (p. 14). Besides, it requires the organisations
where it is in their best interests; to disclose publicly their reasons for making decisions which may appear
compromised due to a perceived conflict of interest of the members making the decision (p. 23).
The Code makes the following specific CG disclosure provisions:
1. Organisations should agree in advance the type of [board] evaluation suitable for their organisation and how
to measure and report it in the organisation's Directors' or Annual Report (p.14).
2. An organisation should disclose, at least on an aggregate basis, in its Directors' or Annual Report the
remuneration, bonuses and other benefits received by Members of the Board (p. 18).
3. Owners should be informed of any "related party transaction" that may significantly affect the current and or
future financial position, the performance, the capacity, the opportunities and/or the risks of the organisation.
Such disclosure should explain what the nature of the transactions is and how the potential conflicts of
interest or other risks for the organisation are being avoided and/or mitigated (p. 21).
4. Organisations should report on how they have both positively and negatively impacted on the environment
and on the economic and social life of the community in which they operate and how they believe they can
improve the positive and eradicate or lessen the negative aspects in the coming year (p. 22).
5. Sustainability reporting and disclosure should be integrated with the organisation's financial reporting (p.
23).
6. Organisations in their annual or directors' reports should state whether the Code has been adhered to or, if
not, explain with reasons in what respects it has not been adhered to (p. 11).
5.1.3 RBM code
The review of the RBM Code indicated that it has made clear and extensive disclosure provisions. Similar to the
others, the RBM Code recognises the annual report as the main vehicle for CG disclosures. The following are the
specific disclosures made in the Code:
1. Every board committee shall have a clear, formal charter that sets out its role, schedule of meetings and
delegated responsibilities whilst safeguarding the ultimate decision making authority of the board as a whole.
The summary of the charter and membership of each board committee shall be published in the annual report
(p.8).
2. The annual report of banks shall include information on the name, age, experience, education, affiliation, and
committee membership of each director. The reports should also identify which directors are independent,
and include the respective dates of the board members' appointments and their percentage shareholding in
the institution and other companies if applicable (p.11)
3. [Board]Attendances shall be disclosed in the annual report (p.11)
4. The [board] evaluation shall be conducted annually, and every institution shall be required to disclose in the
annual report that this has been done (p.14).
5. The board shall attest in a statement on the adequacy of accounting records and effectiveness of the system of
internal controls and risk management, and this statement shall be included in the annual report (p.21).
6. The annual report shall include a statement confirming that appropriate accounting policies supported by
reasonable and prudent judgments and estimates have been used consistently (p.21):
The annual report shall also state whether the International Financial Reporting Standards have been
adhered to or if there has been any departure in the interest of fair presentation, this shall not only be
disclosed and explained but quantified.
The annual accounts shall give the institutions corporate social responsibility and activities both negative
and positive.
The annual report shall state whether these corporate governance guidelines have been adhered to or, if
not, where there has not been compliance the institution shall give reasons.
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7. Accurate disclosures in the annual report shall be made in the following areas (p.22):
Basic organisational structure; major share ownership and voting rights, beneficial ownership, major
shareholder participation on the board or in senior management positions;
Board and senior management structure with qualifications and experience;
Nature and extent of transactions with affiliates and related parties including any institutional matters for
which members of the board or senior management have material interests either directly, indirectly or
on behalf of third parties;
Remuneration policy for members of the board and information about board members, including their
qualifications, the selection process, other company directorships and whether they are regarded as
independent by the board; and
Foreseeable risk factors.
8. The board shall have a clear policy for setting remuneration of executives and nonexecutive directors at
levels that are fair and reasonable in a competitive market for the skills, knowledge, experience, nature and
size of the institution. Every institution shall provide clear disclosure of its remuneration and bonus scheme
policies, level and mix of remuneration and bonus, and the procedure for setting the same in the annual
report (p.23).
9. Every institution shall provide full disclosure in the annual report of director remuneration on an individual
basis, giving details of earnings, share options, restraint payments and any other benefits (p.23).
10. The board shall include in its annual report information on risk management and internal controls (p.24).
11. The board shall include a statement in the annual report that the directors are satisfied to the best of their
ability, that all material risks are being managed effectively (p.25).
12. The board shall include in the annual report the amount of fees paid to the auditors by the institution and its
affiliates and clearly distinguish audit and non-audit fees (p.28).
13. The board shall explain in the annual report what non-audit work was undertaken if any, and why this did not
compromise auditor independence (p.28).
14. Banks shall include in their annual report information of their activities, performance and how they have
served the interests of their stakeholders (p.29).
15. Banks shall include in their annual report the nature and extent of their social activities, ethical, safety,
health and environmental management policies and practices. The board must determine what is relevant for
disclosure, having regard to the institution's particular circumstances (p.29).
It was noted that although the three Codes recognise annual report as the main vehicle, they all to a larger extent
left discretion to organisations to decide on the form and location of the disclosures. According to Bhasin (2012)
some degree of "harmonisation" of the location is desirable to make the relevant data more accessible. Biobele et
al. (2013) recognised also the greater need for concise and comparable reports due to the increasing sophistication
of CG disclosure issues. Specific location will accord users ease in accessing the information and consequently in
assessing the organisation and in making appropriate comparisons. The two possible approaches suggested by
Bhasin (2012) included putting all CG disclosures in (1) a "separate section" of the annual reports, or (2) in a
stand-alone "CG reports".
Furthermore it was noted that the three codes have no disclosure checklist as a guide and to ensure that at least
some important minimum information is disclosed. Basically an explicit disclosure checklist can be provided for
indicative and standardisation purposes, thus ensuring that there is no leeway. The checklist will ensure
explicitness and according to Adamu (2013) explicit regulation is the most powerful driver of corporate
disclosure.
5.2 Extent of incorporation
5.2.1 Level of incorporation
The individual scores of the twenty seven (27) items are present in TABLE 5 (see the APPENDIX). However,
TABLE 2 presents the overall incorporation level. As can be noted, the table gives an overall incorporation index
of 0.35 for the Old Code, 0.30 for the revised Code and 0.70 for the RBM Code. The results indicate low level of
incorporation of the disclosure provisions in both the Old Code and the Revised Code. On the other hand the
results reveal high level of incorporation in RBM Code. Thus the incorporation gap index is smaller (0.30) for
RBM Code relative to the Revised Code (0.70) and Old Code (0.65). The gap index furthermore indicates the
Revised Code is worse off after revision, thus much still need to be done to improve it in terms of disclosure and
transparency provisions.
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2: Overall level of incorporation
As can be observed on FIGURE 1, the decomposition analysis of the incorporation index indicate that 59% of the
items on the disclosure provision checklist were recognised in the Old Code; however only 22% were also
explicitly provided as disclosable with specific disclosure vehicle. On the other hand, the Revised Code
recognises 48% of the items on the checklist. However, consistent with the Old Code, 22% of the items are
provided as disclosable items and 19% have a specified provision of the disclosure vehicle. In contrast RBM
Code recognises 70% of the items on the checklist and all of them are provided as disclosable items with a
specified vehicle of disclosure.
5.2.2 Impact of revision on Code in terms of disclosure provisions
The assessement of the improvement was done using the incorporation gap between the Revised Code and the
Old Code (see TABLE 5 Column C in the APPENDIX). As shown in TABLE 2 above, incorporation gap index
for the Revised Code is relatively higher (0.70) compared to (0.65) of the Old Code. Furthermore, the mean score
the incorporation gap between the Revised Code and the Old Code is negative (-0.05) (see TABLE 5 Column C),
indicating that the Old Code was relatively better in term of disclosure provisions.
Furthermore, TABLE 3 shows the disclosure provision items that got bad with the revision of the Code. The table
reveals that 'management discussion and analysis', 'benefial ownership' and 'human resources policies' that were
fully incorporated in the Old Code, are now completely omitted in the Revised Code. Besides,
'management/employee relations' and 'procedures for shareholder meetings' merely recognised in the Old Code,
are also completely omitted in the Revised Code.
Management's discussion and analysis
Management/Employee relations
Procedures for shareholder meetings
Table 4 presents the items that improved with the revision. As can be seen, both 'environment' and 'risk
management system' have a positive gap of (0.33) indicating that they have just been recognised in the Revised
Code. Furthermore, 'board evaluation' had a positive gap of (0.67) indicating that it has been provided as a
disclosable item, however without the disclosure vehicle being specified. On the other hand, details of related
party transactions are fully incorporated in the Revised Code.
-
0.20
0.40
0.60
0.80
Old Code Revised Code RBM Code
0.59 0.48 0.70
0.22 0.22
0.70
0.22 0.19
0.70
FIGURE 1: Levels of Incorporation
Mention
Disclosure
Location
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that improved with revision
Assessment of governance (
Details of transactions involving major shareholders and board
members, key executives (or their close family, relations) – related
party transactions
6. Conclusion
The study was an evaluation of the Malawian Codes of CG regarding the incorporation of disclosure provisions in
line with the OECD principles of CG. The results indicate that the Old Code had wide incorporation gap (0.65)
which unfortunately has been further widen by the revision to (0.70). On the other hand a relatively low
incorporation gap (0.30) was revealed in relation to the RBM Code.
The study reveals that disclosure provisions seemed to have been neglected in the revision process. The results
suggest that more work is still needed to perfect the Code. Furthermore, the study shows that care is needed when
developing and revising the Codes. The process should be rigorous with an appropriate checklist to ensure that all
important areas have been incorporated, thus ensuring that the development does not end up with a watered down
code.
The study therefore recommends a comprehensive review of the whole Revised Code in line with the
international CG frameworks to make sure that it stands the test of the international standards. If the review of the
whole is not possible, then at least the disclosure provisions should be upgraded. Upgrading should considering
making explicit disclosure provisions that include specifying the form and the vehicle for disclosure. Besides,
should consider incorporating a standard disclosure checklist. This will prevent superficiality thus ensuring that
sufficient disclosures are made by the companies.
Finally it must be noted that strengthening the disclosure provisions is particularly crucial considering that
Malawi is in developing stage thus she must be able to attract foreign direct investment. CG is an important
consideration for investors around the world, especially in Africa and other emerging markets (Nganga et al.,
2003). Furthermore, with globalisation it is increasingly imperative especially for Africa to signal transparency
and accountability to potential investors through CG best practice (Humayun and Adelopo, 2012). Biobele et al.
(2013) also posited that credible CG reporting has positive impact on the investors' confidence and on revamping
image of a country causing her organizations to have unrestricted access to capital from both local and
international stock market, that breed economic viability and greater economic growth.
www.ijbssnet.com Center for Promoting Ideas, USA ©
255
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256
Appendix
(A)
Incorporation Index
(B)
Incorporation Gap
Index =
1-Incorporation Index
Incorporation
Gap Between
Revised Code
and Old Code
notes 1.00 1.00 1.00 0.00 0.00 0.00 0.00
Management's discussion and analysis
Cross shareholding relationships
Information about individual board
members' qualifications 0.00 0.00 1.00 1.00 1.00 0.00 0.00
Independence status of members
Directorships in other companies
board and key executives & aggregate
disclosure 1.00 1.00 1.00 0.00 0.00 0.00 0.00
Disclosure of remuneration on
individual basis 0.00 0.00 1.00 1.00 1.00 0.00 0.00
Details of transactions involving major
shareholders and board members, key
executives (or their close family,
relations) 0.00 1.00 1.00 1.00 0.00 0.00 1.00
Management/Employee relations
Relations with other stakeholders
creditors, suppliers, local communities 0.33 0.33 1.00 0.67 0.67 0.00 0.00
Governance structure and polices
Procedures for shareholder meetings
... The annual reports were analysed and a "1" was assigned when an item on the disclosure framework (see TABLE 3) is disclosed and a "0" when it is not disclosed in the annual reports. The scoring methodology is consistent with other related annual report disclosure studies (Tsamenyi et al., 2007;Hossain, 2008;Bhasin, 2012;Biobele et al., 2013;Lipunga, 2014). Sinceneed to prepared "integrated report" is not explicitly given in the Malawi Code II, no company was expected to prepare a standalone integrated report. ...
... Consistent with other annual report corporate governance disclosure studies (Boolaky, 2011;Lipunga, 2014), the IRI was calculated using the following formula: Thus, the expected maximum score for each sampled company was 25, since there are 25 items of disclosure. The expected maximum IRI score was "1" and with a minimum of "0". ...
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![Andrew Munthopa Lipunga]()
The study investigated the level of Integrated Reporting (IR) in developing countries focusing on Malawi. It employed content analysis using an Integrated Reporting Index (IRI) in examining annual reports of Malawian listed companies. Based on the score range of 0 to 1 being the minimum and maximum respectively, the study revealed an average IRI of 0.43and consequently an IR gap of 0.57. The average IRI suggested achievement of some progress toward IR by the companies and on the other hand the IR gap indicates the need for much more effort to be exerted in promoting IR amongst the listed companies in Malawi. Besides, are view of the Malawian IR framework suggested that IR is being governed by a code of corporate governance that lacks detailed guidelines with respect to it hence in need of upgrading of the same.
The adjudication for International corporate governance disclosure framework, such as, the International Standard of Accounting and Reporting (ISAR), has assumed a state of relevance between local and international markets participants, to circumvent the encumbrances of incomparable corporate governance disclosures despite the integrations of commercial activities around the world. The study, therefore, examined the significance of international corporate governance disclosures on financial reporting in Nigeria. Content analysis design was adopted, while population t-test and multiple regressions were used for hypothetical tests. It was however discovered that, International Corporate Governance disclosures significantly affects companies' total assets and profitability, and that, Nigerian Banks report more than half the ISAR requirements, but was done indiscriminately. It is therefore recommended that, relevant codes of corporate governance in Nigeria be upgraded to reflect international specifications and the remiss of good governance be done away with, if we must achieve anti-corruption and investment drive. ISAR should be adopted and sanctions meted for non-compliance. Where this is done, organizations will have access to capital from international stock market and expansion of their business across boundaries. This will eventually breed economic viable Nigeria, free off corruption, and the actualization of the rebranding Nigeria ideology.
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![Martin Mulyadi]()
- Yunita Anwar
Good corporate disclosure is one principle of good corporate governance (GCG). Many of significant business failures over recent years were later shown to be the result of unethical behavior of management. In order to improve the growing concern, there was accountability and governance reform trigerred by Enron and WorldCom case in U.S. which in turn produced Sarbanes-Oxley Act. In the same time, there is also growing concern of GCG implementation. Implementation of GCG will create corporate sustainability and could be measured with corporate disclosure. Investors also take responsibility to push the corporation toward implementation of good corporate governance. Recent study showed that there is inconsistent finding regarding correlation between corporate sustainability and corporate profitability. Other research also stated that culture is significant in implementing GCG in a firm. Our study which employs EGARCH econometric model, shows that from four Indonesian corporation that received Annual Report Award for three consecutive years, only one corporation show that good corporate disclosure matter to investors in 2008 (with risk factor). Without using risk factor, we find evidence from the same corporation that their good corporate disclosure affected investors in 2007 and 2008; also, good corporate disclosure from one other corporation in 2008 matter to investors. However, as culture is significant in GCG implementation and yet there is still many corruption and bribery case in Indonesia, we can conclude that because of those culture, good corporate disclosure does not really matter for Indonesian investors.
- Kabir Md. Humayun
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![Ismail Adelopo]()
This paper presented an account of corporate governance disclosure practices by public enterprises in Swaziland. The study was an attempt to compare the findings to the corporate governance disclosure requirements constructed by the United Nations. Findings revealed that the idea of corporate governance disclosure in general is a relatively new requirement for Swaziland business organizations and, at present, Swaziland does not have a specific framework for corporate governance which can be applicable to all business entities. The study also showed that the most important area regarding corporate governance disclosure was the financial transparency disclosure issues while the least important related to auditing disclosure issues. The study encouraged Swaziland government and companies to focus on improving the governance disclosure levels and develop a common corporate governance framework which will be applicable to all entities in order to enhance good corporate governance practices in the country. But such framework must take the socio-cultural and institutional conditions in Swaziland into account rather than transplanting corporate governance framework from different setting.
This paper examines the impact of corporate governance on bank performance in Nigeria during the period 2005 to 2009 based on a sample of six selected banks listed on Nigerian Stock Exchange market making use of pooled time series data. Form the findings, we observe that corporate governance have been on the low side and have impacted negatively on bank performance. The study therefore contends that strategic training for board members and senior bank managers should be embarked or improved upon, especially on courses that promote corporate governance and banking ethics. Introduction The importance of a vibrant, transparent and healthy banking system in the
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![Edward Sek Khin Wong]()
- Choong Kwai Fatt
- Priscilla Yap
This study examined the issues of disclosure of and corporate governance of insider trading in Malaysia. Insider trading has evolved itself in various jurisdictions from the agency theory to the misappropriation theory. In Malaysia, the mere fact of the receipt of information itself resulted in a triggering of a breach of insider laws regardless of unrealized gain or loss. In this paper, documents from several articles, section 183 -188, Capital Market and Services Act 2007 (CMSA), including the inclusion of "Chinese walls" were used as a defence for a corporation with regard to conduct of its officers under section 194 of the CMSA. Moreover, the Malaysian disclosure best practises guidelines of 2004 were scrutinized in studying and establishing an evolution of insider provisions leaning towards the philosophy of disclosure theory. The findings indicated that should the insider misappropriated the "property information" of a Company by non-disclosure, by not disclosing it in a timely manner, by being inaccurate, by being ambiguous, or by disclosing to another person who have proprietary information before it officially reached the market warrant the prospect of violating insider-trading rules? As a result, the removal of intentional misappropriation and the inclusion of the recipient of such information being liable depict the emphasis of disclosure. This study can assist law enforcement bodies to provide legitimacy to the transparency rules and insider trading provisions to reduce the gap between the legal norms and the social norms of the day.
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![Musa Uba Adamu]()
Abstract This study assesses the effect of company leverage on corporate risk disclosure in Nigeria. The population of the study comprises four sectors quoted in the Nigerian Stock Exchange. These sectors contained 24 companies on which stratified sampling technique is used in the selection of 12 companies for the study. The data for the study have been drawn from year 2010 annual reports of the sample companies. The study employs regression tools of analysis in the course of the study. The result shows that corporate risk disclosure is not significantly related to company leverage. It is concluded that company size is not influencing corporate risk disclosure in Nigeria. It is recommended that, the CBN and other regulators responsible for term loan should come up with a comprehensive guidelines and policies on corporate risk disclosure, because a lot of companies complaint on their inability to access loan facilities from the financial institutions and resulted their operation to carry on below normal capacity, this is very dangerous and is at detriment of the Nigerian economy. This move can help financial institutions to assess company risks and give them loan facility on demand; this is good and can facilitate Nigerian economy. Keywords : Corporate Risk Disclosure and Leverage Nigeria.
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![Michael Agamah]()
This study set out to ascertain the extent to which public companies listed on the Nigerian Stock Exchange (NSE) comply with corporate governance and risk management principles (the principles), based on the assumption that directors of NSE-listed companies will, on the basis of their awareness of the principles, "[ensure] that corporate actions, agents and assets are directed at achieving the corporate objectives established by the corporation's shareholders" (Sternberg, 2004, p. 28). Using survey design, closed-ended questionnaires, and secondary data sourced from the Corporate Affairs Commission, the survey instrument was administered on 35 companies selected by random sampling (from a total population of 113), out of which 26 responses were received. The responses were statistically analyzed to measure the extent of the respondents' awareness of, and compliance with, the principles. The Pearson correlation coefficient was employed to determine the relationship between the level of awareness of, and extent of compliance with, the principles. The research results show that even though there is a high level of awareness of the principles amongst NSE-listed companies, "negligible/scant positive" (Buglear, 2012, p.163) correlation was established between the level of awareness of these principles and the extent of compliance by the companies. An implication of this scenario for managerial practice amongst the NSE-listed companies is that more corporate resources need to be deployed to strengthen the compliance function in these companies.
This paper assesses the extent of corporate governance voluntary disclosure and the impact of a comprehensive set of corporate governance (CG) attributes (board composition, board size, CEO duality, director ownership, blockholder ownership and the existence of audit committee) on the extent of corporate governance voluntary disclosure in Egypt. The measurement of disclosure is based on published data created from a checklist developed by the United Nations, which was gathered from a manual review of financial statements and websites of a sample of Egyptian companies listed on Egyptian Stock Exchange (EGX). Although the levels of CG disclosure are found to be minimal, disclosure is high for items that are mandatory under the Egyptian Accounting Standards (EASs). The failure of companies to disclose such information clearly shows some ineffectiveness and inadequacy in the regulatory framework in Egypt. Moreover, the phenomenon of non-compliance may also be attributed to socio-economic factors in Egypt. Therefore, it is expected that Egyptian firms will take a long time to appraise the payback of increased CG disclosure. The findings indicate that that—ceteris paribus—the extent of CG disclosure is (1) lower for companies with duality in position and higher ownership concentration as measured by blockholder ownership; and (2) increases with the proportion of independent directors on the board and firm size. The results of the study support theoretical arguments that companies disclose corporate governance information in order to reduce information asymmetry and agency costs and to improve investor confidence in the reported accounting information. The empirical evidence from this study enhances the understanding of the corporate governance disclosure environment in Egypt as one of the emerging markets in the Middle East.
Source: https://www.researchgate.net/publication/262353298_A_Review_of_Disclosure_Provisions_in_Malawian_Codes_of_Corporate_Governance
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