Social Disclosure and Accounting Data: Effects on Share Prices in an Emerging Market

Existing literature presents divergent results on the value relevance of accounting information following the adoption of the International Financial Reporting Standards. This highlights the importance of considering local market conditions and regulatory frameworks when analysing how changes in accounting rules affect the value relevance of financial information. Further, researchers emphasised that traditional accounting data alone is inadequate for explaining the value relevance of financial reporting; it should be complemented with non-financial information. Additionally, researchers noted limited research examining the capital market effect of social reporting, especially in emerging markets where social disclosure regulation is significantly increasing. Hence, this study aims to assess the capital market effect of accounting information under the Malaysian Financial Reporting Standards (MFRS) and examine the influence of social information disclosure on the share prices of Malaysian listed firms. Besides, this study explores whether market value is better explained by the combined effects of financial accounting information and social disclosure, as opposed to accounting information alone. Using a more extensive and diverse sample, a panel data analysis was performed for this study. The results show that firms' reported earnings and equity book value significantly influence their share price under the MFRS. The findings highlight the value relevance of accounting information under the MFRS framework, showcasing its role in Malaysia as an emerging market. Hence, Malaysian firms should undertake enhanced measures to engage more closely with MFRS updates. This study also found a significant positive association between social disclosure and firms' share prices, demonstrating that social information disclosure provides incremental value-relevant information beyond traditional financial accounting. The results indicate that enforcing social reporting has a value-enhancing effect on Malaysian listed companies. The findings provide further insights to Malaysian firms on the benefits associated with social reporting practice.