THE EFFECT OF CORPORATE GOVERNANCE BEST PRACTICES ON THE QUALITY OF CARBON DISCLOSURES AMONG MALAYSIAN PUBLIC LISTED COMPANIES

Abstract

This study aims to assess any changes in the Carbon Disclosure Quality (CDQ) of firms publicly listed on Bursa Malaysia and to examine the effect of adopting the level of the Corporate Governance Best Practices (CGBP) on CDQ from the perspectives of agency and stakeholder theories. The Friedman and Wilcoxon signed-rank tests were conducted to assess if there were any changes in CDQ over the study period. The CGBP is measured by a composite index of a group of variables for board, audit, and Environmental Committees (EC). In addition, CDQ is measured by a comprehensive carbon disclosure checklist in line with well-grounded literature and Malaysian and international guidelines related to climate change disclosures to identify and categorize carbon disclosure. Using a sample of 72 listed carbon-intensive firms in Bursa Malaysia from 2015 to 2019 and multiple regression analysis, the results show that Malaysian firms implementing good practices outlined in the Malaysian Code on Corporate Governance (MCCG) are more likely to provide high-quality carbon information than poorly governed firms. While the overall CDQ of Malaysian firms remains very low, the CDQ has improved in Malaysia. The results imply that carbon disclosure awareness is growing in Malaysia as firms have gradually integrated climate change into their business strategies. The findings may benefit a vast group of regulatory bodies to assess Malaysian firms’ response to local and international carbon guidelines.