Voluntary disclosure by Shariah approved companies: an exploratory study

Abstract

Purpose: The purpose of this paper is to investigate the extent of voluntary disclosure (EVD) (i.e. overall, conventional, and Islamic disclosure) in the annual reports of Shariah Approved Companies (ShAC) listed on Bursa Malaysia.Design/methodology/approach: A disclosure index was developed, which consists of 59 items (including items related to the Shariah, i.e. Islamic items), to measure the EVD in the annual reports of ShAC. Secondary data from annual reports were analyzed using descriptive statistics and t‐test.Findings: ShAC disclosed on average 19, 21 and 17 percent of overall, conventional, and Islamic items, respectively. The EVD of conventional items is comparable to prior studies, and higher than Islamic items.Research limitations/implications: The paper only used one‐year annual reports for the year 2003, but it provides a starting point for future research on the issue of voluntary disclosure by ShAC.Practical implications: The findings provide evidence that ShAC still lack voluntary disclosure, especially, Islamic disclosure items. Such findings could be useful to regulation authorities in Malaysia for the improvement of overall disclosure practices by ShAC.Originality/value: The paper is the first empirical study to investigate the EVD, both Islamic and conventional, in the annual reports of ShAC.