DOES THE AUDIT COMMITTEE EFFECTIVENESS INFLUENCE THE REPORTING PRACTICE OF GHG EMISSIONS IN MALAYSIA?

Abstract

Following the significant changes in climate change and capital market policies, the present study had examined if the audit committee (AC) effectiveness influences the reporting practice of greenhouse gas (GHG) emissions among the Malaysian public listed companies. Given that GHG emissions are part of corporate reporting, the reporting practice of GHG emissions should therefore be part of the AC’s role. The present study selected Malaysian plantation sector as the sample, comprising 43 public listed companies on Bursa Malaysia. Content analysis of the annual and sustainability reports was conducted by establishing a checklist based on the sustainability reporting guide (SRG) to determine the level of GHG emissions disclosure from 2016 until 2019 in the annual and sustainability reports. Next, the disclosure was regressed against AC effectiveness, controlling for company size, profitability, leverage, board size and board independence variables. It was found that AC effectiveness is vital to ensure an adequate disclosure of GHG emissions. This study deepened the understanding about the functions of AC beyond the traditional and compulsory roles to oversee the financial reporting process. Empirical evidence that AC effectiveness leads to a better corporate disclosure practice had also been presented.