Companies Resources The Intangible Assets Accounting Essay
This chapter begins with the identification of the independent and control variables, two types of regression models as well as the empirical schema. After that, the developments of six hypotheses are discussed in detail. In addition, it also discusses the research methodology adopted to carry out this study. This includes the research instrument used, sample selection method of 242 companies and the data collection process. Finally, the measurement of variables used is discussed at the end of this chapter.
entification of Variables
Based on the previous literature reviewed on CSR disclosures, resource-based theories and agency theories, some potential variables are identified to be the independent variables which could influence the extent of the CSR disclosures, the mediating variables as well as the control variables.
Identification of independent variables
According to the resource-based theory, Tsang (1998) has grouped the resources into three categories namely physical resources which are comprised of tangible and intangible assets; human resources which include education, training, experience and all other soft skills; and organisational resources which include corporate culture, organisational structure, rules and procedures, management information system and the relationship with external institutions.
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Furthermore, Galbreath (2004) has classified the companies' resources into four categories which include intellectual property assets, organisational assets, reputational assets and capabilities of the companies. In addition, Fahy (2002) has identified three types of resources which are tangible assets, intangible assets, and capabilities in examining the link between companies' resources and firm performance.
In addition, Leask and Parnell (2005) have highlighted that companies' resources consist of three categories which are physical capital resources which relate to the equipments and materials; human capital resources which relate to employees; and organisational capital resources which relate to the operations of the organisations. Ainuddin et al. (2009) have identified two types of resources known as assets and capabilities. Assets are referred to tangible assets whereas capabilities are referred to as intangible assets.
Weidong (2007) has identified two types of resources which could lead companies in poor countries to gain competitive advantages. There are tangible resources and intangible resources with heterogeneity and imperfect mobility characteristics. This is supported by Branco and Rodrigues (2006) who also classified companies' resources into tangible assets and intangible assets. Therefore, two common types of corporate resources maintained by the Malaysian public listed companies are identified to consist of intangible assets and tangible assets.
Companies' resources, the intangible assets
Companies can gain sustainable competitive advantages by strategically using their corporate resources especially intangible assets. In order to gain competitive advantages, companies have to ensure that their resources cannot be duplicated and alternated by their competitors (Canto & Gonzalez, 1999; Barney, 1999). Besides, Branco and Rodrigues (2006) also argued that the availability of adequate intangible assets is an important source of competitive advantage provided as companies have strategically used the intangible resources to invest in CSR activities.
In addition, Canto and Gonzalez (1999) found that intangible assets which comprise of human resources and commercial resources have a positive relationship with the success of R & D activities carried out by the companies. Galbreath (2005) has also found four types of intangible assets which comprise of intellectual property, organisational assets, reputational assets and capabilities that have a positive relationship with the companies' success.
Furthermore, Fahy (2002) has found that investment in intangible assets can lead companies to gain sustainable competitive advantages in a global environment. This is supported by Coates and McDermott (2002) who found that intangible assets known as knowledge is the key source of competitive advantage. This can be achieved when employees effectively use their expertise and skills in carrying out their job responsibilities.
188.8.131.52 Companies' resources, tangible assets
Some previous studies found that intangible assets are the main contributors to the companies' performance which eventually leads to the competitive advantage. However, the role of tangible assets in determining the continuity of the business operations and bringing the companies ahead of their competitors to gain sustainable competitive advantages cannot be substituted by intangible assets (Craig & Diga, 1998; Fahy, 2002; Galbreath, 2005).
In addition, Branco and Rodrigues (2006) suggested that tangible assets can be the source of competitive advantages if companies efficiently and effectively assemble, integrate and manage the resources and use the resources to perform their activities.
Besides, Douglas, Doris and Johnson (2004), Mohd Ghazali (2007) and Udayasankar (2007) argue that larger companies are more likely to invest in CSR activities rather than in smaller companies due to the availability of resources. This is because engaging in CSR activities and disclosures in the annual reports requires the outflow of monies.
Furthermore, Bhattacharyya (2010) also found that the availability of tangible assets have encouraged companies to invest in CSR activities due to the continuous benefits gained from those activities.
Most of the CSR disclosure literature in Malaysia have discussed the relationship between the corporate governance and the extent of CSR disclosure to include the influence of ownership structures (family, government, foreign ownerships) on CSR disclosures (Mohd Ghazali, 2007; Amran & Devi, 2007; Ying et al., 2008; Darus et al., 2009).
In addition, other studies have also examined the relationship between ownership structures which comprise of state ownership, managerial ownership, legal-person ownership, block holder ownership and foreign listing ownership, and the extent of CSR disclosures in China (Xiou & Yuan, 2007).
This is supported by Rashid and Lodh (2008) who examined the influence of ownership concentration on the extent of voluntary CSR disclosure in developing countries. Therefore, two types of ownership structures are identified to determine the interaction impact with a positive relationship between corporate resources and the extent of CSR disclosures.
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Ownership structures, percentage of family ownerships
Mohd Ghazali (2009) found that director ownership is negatively associated with the extent of CSR disclosures. This is because these types of companies less likely to be the main interest of the public to do the CSR activities.
In addition, Darus et al., (2009) have found that the regulatory efforts did not change the family owners' negative perspective on the CSR activities and disclosures. As a result, these family companies were less likely to disclose CSR information in the annual reports (Lopez-Iturriaga et al., 2009)
Ownership structures, percentage of government ownerships
On the other hand, the companies with higher government shareholding tend to disclose more CSR information in their annual reports to release their public accountability (Mohd Ghazali, 2007). This is supported by Darus et al. (2009) who found that the regulation imposed by the government appears to promote the CSR disclosures in government owned companies.
In addition, Amran and Devi (2008) also revealed that the government has a significant positive influence on the extent of CSR disclosures. This is consistent with the study carried out by Ying et al. (2008), Said et al. (2009) and Siwar and Md Harizan (year?) who suggest that the government should take the effort to improve the accountability and transparency of financial reporting in Malaysia.
Two control variables are identified from the previous literature. Rashid and Lodh (2008) used return on assets (ROA) as a profitability measure to examine the performance of the firms. This is calculated by dividing Earnings Before Interest and Taxes with total assets. This is also consistent with Said et al. (2009) and Mohd Ghazali (2007). In addition, the study also identified that the total debts are an important instrument that is closely related to the extent of CSR disclosures. Therefore, the ratio of total debts to the total assets is considered to be the control variable. By controlling these two variables it will enhance the relationship between corporate resources and the extent of CSR disclosures (Rashid & Lodh, 2008; Xiou & Yuan, 2007).
Multiple Regression Analysis
A linear-multiple regression analysis is used to test the association between the dependent variable of CSR disclosures and the independent variables of companies' resources which are tangible assets and intangible assets. The following model is estimated:
CSRD = Î²0 + Î²1INTAN + Î²2TAN + Î²3FINTAN + Î²4 FTAN + Î²5 GINTAN + Î²6GTAN Î²7LEV + Î²8ROA + âˆ‘t
CSRD is the extent of CSR disclosures
TAN is the tangible assets
INTAN is the total intangible assets
FINTAN is the percentage of family members on the board to total number of directors on board X total intangible assets
FTAN is the percentage of family members on the board to total number of directors on board X total tangible assets
GINTAN is the proportion of equity owned by the government as its agencies such as Khazanah Nasional Berhad, Permodalan Nasional Berhad (PNB), Lembaga Tabung Haji (LTH), Lembaga Tabung Angkatan Tentera (LTAT), Menteri Kewangan (MKD) and Kumpulan Wang Simpanan Pekerja (KWSP) to the total shares issued X total intangible assets
GTAN is the proportion of equity owned by the government as its agencies to the total shares issued X total tangible assets
LEV is total liabilities divided by total assets.
ROA is the earnings before interest and tax (EBIT) divided by total assets
âˆ‘t is the error term
Hierarchical Regression Analysis
Based on the above model, three separate cross-sectional regression models are developed to test hypotheses 1 to 3 based on the hierarchical regression analysis. They are designed to assess whether there are any coefficient difference across the different sub-population. The three models are as follows:
CSRD = Î²0 + Î²1LEV + Î²2ROA + âˆ‘t
CSRD = Î²0 + Î²1INTAN + Î²2TAN + Î²3LEV + Î²4ROA + âˆ‘t
CSRD = Î²0 + Î²1INTAN + Î²2TAN + Î²3FINTAN + Î²4 FTAN + Î²5 GINTAN + Î²6GTAN Î²7LEV + Î²8ROA + âˆ‘t
Agency Theory - Ownership structureBelow is the empirical schema that has been designed for the study:
Family members (FAM)
The Extent of CSR disclosures
Resource-Based View theory - Corporate Resources
Tangible Assets (TAN)
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Intangible Assets (INTAN) H
Control variables - 1) Leverage
Agency Theory - Ownership structure
Government ownership (GOV)
Figure 1: Empirical schema for companies' resources and CSR disclosures
Development of Hypotheses
Based on the literature reviewed, two types of resources have been identified which are tangible and intangible resources to test their associations with the CSR disclosures by Malaysian public listed companies in three years from 2006 to 2008. This is due to the limited resources available during the global economic crisis which began in 2007, indicating that most Malaysian companies have been in the state of minimising and cutting off the relevant costs in maintaining their sustainability in the market. Therefore, investing in CSR activities will be the main issue for these companies.
Besides that, the two types of ownership structures are the moderating variables between the relationship of the companies' resources and the CSR disclosures especially in the current global economic crisis. These structures consist of family ownership and government ownership structures. The family members on the board will find a way to minimise all the costs in maximising their profits especially costs which are not directly related to the performance and sustainability of their companies.
On the other hand, the companies which are controlled by the government agencies are required to support the government's efforts in encouraging Malaysian companies to be socially responsible corporate citizens. These companies are more likely to participate in CSR activities as a way to encourage other public listed companies to be more caring on society and environmental issues. These hypotheses are formed based on the prior literature that has been reviewed.
Intangible Assets and CSR Disclosures
Other important sources of competitive advantages are the intangible resources like the capabilities, the skills and expertise of employees. Sometimes, the investment in CSR activities will in turn developed new capabilities and resources (Branco & Rodrigues, 2006). However, before the companies can benefit from such activities, they need to have enough intangible resources so that they can generate profits and consequently contribute in the CSR activities.
Ainuddin et al. (2007) also argued that valuable resources are those resources which can lead the companies to achieve efficiency and effectiveness in their performance and eventually gain sustainable competitive advantages. The authors have tested the influence of the resources' characteristics with the firms' performance which is valuable, rare, imperfectly imitable and non- substitutable. They found a positive relationship between value and rarity with the firm's performance for both assets and capabilities.
Furthermore, Canto and Gonzalez (1999) have examined the relationship between firm resources which are financial resources, physical resources and intangible resources with R & D activities on 256 Spanish firms in 1992. The authors have categorised intangible resources into two categories which are human resources and commercial resources. They found a significant result whereby a high qualification of human resources is important in determining the success of the R & D activities carried out by the companies. On the other hand, exports are one the main determinants in R & D activities under the commercial resources categories which is not significant.
In addition, four components of intangible resources have been identified by other researchers which are intellectual property, organisational assets, reputational assets and capabilities, and these kinds of resources are said to have a relationship with the companies' success (Galbreath, 2005). One of the intangible resources is reputational assets which are developed from corporate social responsibilities. When companies participate and invest in CSR activities, this will create a goodwill and good reputation among the stakeholders especially the public at large and the environmentalists. Therefore, this kind of resources must be managed well in avoiding them from being easily imitated by competitors for the sake of the companies' success (Galbreath, 2005).
Bhattacharyya (2010) added another type of intangible resources which were generated from strategic CSR activities for example, technological expertise for the socially responsible, green products and services which are environmental friendly. Deniz and Suarez (2005) also found that companies which participated in the CSR programme will gain competitive advantage in three forms. First, the programme will form an effective base for competing in the markets. Second, the CSR programme will also lead companies to make greater contributions to the society. Third, the government will exempt companies from the new regulations imposed.
Furthermore, Fahy (2002) has developed a resource-based model of sustainable competitive advantage in a global environment. The author has examined the relationship among companies' resources which comprise of tangible and intangible assets, competitive advantages and firm performance. He found that intangible assets are an important source of sustainable competitive advantages than the tangible assets at a one percent level.
In addition, Coates and McDermott (2002) have found that intangible assets which are known as knowledge is the key source of competence. This knowledge can be expressed through the expertise and skills of the human capital in carrying out their routine duties with a high degree of specialty as well as with problem solving skills to gain sustained competitive advantages.
Barrat and Oke (2007) further added that the resources which can give a supply chain linkages a distinctive visibility come from a combination of valuable, rare, imperfectly mobile, not imitable and not substitutable resources. This is evidenced by five case studies on supply chain linkages conducted by the authors. They found that the external linkages which link to distinctive visibility will finally lead to a sustainable competitive advantage to the supply chain linkages. Thus, the following hypothesis is posited:
H1a - Intangible assets are significantly positively related to the extent of CSR disclosure.
Tangible Assets and CSR Disclosures
The tangible resources are important elements in creating sustainable competitive advantages for the companies (Galbreath, 2005; Fahy, 2002). Companies need all those kinds of resources in order to continue running the business, be able to invest in the R and D expenditure in leading the industry and remain competitive especially in facing the global economic crisis. The manufacturing process needs a lot of money to be invested before the products can be produced and distributed to the market. Companies which do not perform well are less likely to contribute to the CSR activities.
In addition, Bhattacharyya (2010) stated that engaging in strategic CSR activities will enable companies to generate tangible resources like raw natural resources, semi-finished resources, and manpower and so on. Consequently, these kinds of resources encourage companies to actively disclose their CSR activities.
Besides, Craig and Diga (1998) have examined the relationship between CSR disclosures and firm size among ASEAN countries which include Malaysia, Singapore, Indonesia, Thailand and the Philippines. They found a significant positive relationship at a one percent level between CSR disclosures and firm size of ASEAN companies. This proves that firm size is important in determining the level of CSR disclosures regardless of the country of origin.
This is supported by Ahmad, Hassan and Mohammad (2003) who have examined the relationship between voluntary environmental disclosure and total assets, financial leverage, profitability, effective tax rate, audit firm and industry membership of the 299 Malaysian public listed companies in 1999. Unfortunately, the results of the study only supported two variables tested which were financial leverage and type of audit firms. This is due to the fact that the theoretical framework of the principal-agent relationship did not exist in the Malaysian context.
However, Douglas, Doris and Johnson (2004), Mohd Ghazali (2007) and Udayasankar (2007) argued that only larger companies were more likely to invest in CSR activities rather than smaller companies because they had more resources. Thus by participating in CSR activities it will involve additional costs for the companies which eventually lead to the reduction of companies' resources for primary businesses (Balabanes et. al, 1998).
This is supported by Deniz and Suarez (2005) who examined the CSR approaches that family firms adopted in Spain and they found that companies which participated in CSR activities experienced cost disadvantages. This was due to a high cost involvement when participating in CSR activities which could lead them to have to step out from the market.
Even though prior researchers have recognised the key benefits of investing in CSR activities such as improved internal decision making and cost savings, improved financial returns, improved corporate images and so on (Khan et. al, 2009), CSR activities are still seemed to be cost defective for smaller companies. Therefore, the following hypothesis is posited which reflect the importance of resources in influencing the CSR activities:
H1b - Tangible assets are less significantly positively related to the extent of CSR disclosure.
Moderating Effect of Family Ownership on Companies' Resources and CSR Disclosure Relationship
Family ownership companies are those companies in which the board of directors has family relationship with other board members in the company. This includes the relationship of husband and wife, parent and grandparent, brothers and sisters, in-law and cousin. In Malaysia, most of the companies are founded by family owned businesses in which they are the owners and the managers who sit on the board of the company. The traditional goal of this type of company is basically to maximise the shareholders' wealth by generating as highest profits as possible.
Besides that, public accountability in this type of companies is not important because it is not held by the public at large (Mohd Ghazali, 2007). The competing needs of the scarce resources have influenced the companies not to contribute to the CSR activities since all those activities involve money.
In addition, Rashid and Lodh (2008) also found a negative relationship between corporate ownership structures and CSR disclosures among Bangladesh listed companies at a 10 percent level after corporate governance notification. This has proven that the corporate governance mechanism which was introduced in Bangladesh to have outside independent directors on the board was effective because these independent directors have played their roles in encouraging family owners to disclose more CSR information.
Darus et al. (2009) also found that family owners of Malaysian public listed companies do not likely engage in CSR activities promoted by the government. Based on 144 companies' results, family ownership structures were found to have a significant negative relationship with CSR disclosures. This implied that the possibility of collusion between independent non-executive directors and family owners is very high in reducing the amount of CSR disclosures.
However, some other researchers found that family owned companies are more likely to maintain a good relationship with employees, clients and suppliers for the sake of their business (Uhlaner et.al, 2004). This is supported by Wan Hussin (2009) who found that family members on the board are more likely to influence other board members to disclose all the information related to segment reporting. Therefore, the following hypotheses are posited:
H2a - The higher the percentage of family members on the board, the weaker will be the positive relationship between intangible assets and the extent of CSR disclosure.
H2b - The higher the percentage of family members on the board, the weaker will be the positive relationship between tangible assets and the extent of CSR disclosure.
Moderating Effect of Government Ownership on Companies' Resources and CSR Disclosure Relationship
In addition to the family members who founded the companies to run the business for profit making purposes, the government has also set up non-profit organisations to fulfill the social needs (Mohd Ghazali, 2007). The government through its investment companies namely Khazanah Holdings Bhd, PNB, LTH, LTAT, MKD and KWSP, which are normally connected to politics, ensure that their corporate responsibility activities reflect the government' responsibilities towards the society at large. The accountability of reporting will become an important matter since the public will demand more social activities from these organisations because they are considered public owned companies (Mohd Ghazali, 2007).
Khazanah Nasional Berhad has defined Government-Linked Companies (GLCs) as "companies that have a primary commercial objective and in which the Malaysian Government has a direct controlling stake. Controlling stake refers to the Government's ability (not just percentage ownership) to appoint BOD members, senior management, and make major decisions (e.g contract awards, strategy, restructuring and financing, acquisitions and divestments etc.) for GLCs either directly or through GLICs." (Source?) (Abbreviations should be explained the first time used)
In Malaysia, the government has even adopted the Silver Book in 2006 which required the Government-Linked Companies (GLCs) to compulsorily disclose the CSR activities in their annual reports. This is to ensure that their CSR activities will encourage other public listed companies to follow their lead. This is true because other studies have proven that the public listed companies are more active in CSR disclosures than the private companies (Kotonen, 2009).
Said et.al (2009) found a positive relationship between government ownership and CSR disclosures in their study. This implied that the government has the power to intervene on the companies' governance in imposing pressure so that they will disclose more information regarding their CSR activities. This is supported by Xiou and Yuan (2007) who found a positive relationship between CSR disclosures and government ownership structures, although the authors have posited a negative relationship between two of them in the first place. This is because China has begun to encourage companies to engage in CSR activities voluntarily.
Besides, Amran and Devi (2008) also found a significant positive relationship between government ownership and CSR disclosures at a one percent level. This indicates that the government's interaction on companies through shareholding by government agencies is able to influence the level of the companies' CSR disclosures. The same results were found by Ying et al. (2008) between the government owned companies and CSR disclosures in which it was implied that the government had successfully implemented good corporate governance by encouraging Government-Linked companies (GLCs) to enhance transparency and accountability of financial reporting through CSR disclosures. It was also a way to persuade other public listed companies to do the same.
In addition, Darus et al. (2009) found a significant positive relationship between government ownership and CSR disclosures. They argued that the high agency conflict faced by managers in government-linked companies have encouraged them to reduce it through CSR activities, at the same time supporting the government's efforts to serve the society at large. This was consistent with Siwar (year?) who found that Government-Linked Companies (GLCs) supported CSR activities by adopting a high policy for the sake of their employees. Therefore, the following hypotheses are posited;
H3a - The higher the percentage of government ownership, the stronger will be the positive relationship between intangible assets and the extent of CSR disclosure.
H3b - The higher the percentage of government ownership, the stronger will be the positive relationship between tangible assets and the extent of CSR disclosure.
Besides that, other control variables are important to be considered before the dependent and independent variables can be examined. The profitability of the company will influence the level of CSR activities involved. The higher the ROA, the more contributions will be made to the society at large. The companies which disclose more information in the annual reports are considered the benchmark for their good performance (Mohd Ghazali, 2007). More CSR disclosures are made to indicate the better performance of these companies (Rashid & Lodh, 2009).
In addition, the leverage of the company which can be examined from the debt ratio also influences the level of the companies' contributions towards the CSR activities and hence the CSR disclosures. The firms with high debt levels are expected to incur higher monitoring costs. Thus, these types of companies disclose more information in annual reports in order to reduce the monitoring costs (Ahmed & Courtis, 1999). The longer the company's listed on the Main Board the higher the disclosures of corporate responsibilities (Rashid & Lodh, 2009). This is because of the public's expectation towards the public listed companies regarding the corporate responsibility activities which are higher on the ground that those companies are theirs and the profits of the companies should be shared with the public at large.
This study was done based on the content analysis of 242 Malaysian Public Listed companies' annual reports using word count and also information from the data stream. Unerman, 2000 and Rizk et al. 2008 have quoted most of their justifications from previous studies which have used annual reports in CSR content analysis to cover three factors which are:
"Our acceptance of the social importance of the corporate annual report stresses its potential (rather than fact) to be influential. Corporate annual reports can therefore be of interest as much for what they do not report, as for their actual content. This focus on the corporate annual report is also consistent with previous social disclosure studies, since the corporate annual report is the main form of corporate communication and particularly in the case of quoted companies, is made widely available"(page?)
Content analysis is used to measure the extent of CSR disclosures in the annual reports using word count (Ratanajongkol et al., 2006; Unerman, 2000). This measurement is meant for the quantity of CSR disclosures and not the quality part which is normally measured by checking the details of disclosures made for each element in the Bursa Malaysia CSR Framework like environment, community, marketplace and workplace. The number of word disclosed is used because it is more detailed than measuring the number of documents, pages and sentences (Unerman, 2000). Besides, the use of number of pages also tends to cause a lost of information and is difficult to interpret (Mohamad Zain, 1999).
In addition, the differences in choosing the types of words and fonts used by the different authors make the measurement using the number of documents and pages ineffective measurements. Some authors also tend to measure the different grammar to construct a short sentence which conveys the same meaning with long sentences (Ratanajongkol et al, 2006). This further weakens the effectiveness of using the number of sentences to measure the extent of CSR disclosures as compared to the number of words disclosed.
Furthermore, Yusoff (2004) strengthens the use of content analysis in measuring the CSR disclosures which can help researchers and the public to understand the motives behind the business operation which is either for profit making purposes or for the sake of the public at large by giving back the profit earned through CSR activities.
Sample Selection and Data Collection
Sekaran (2006) has highlighted the importance of choosing the right sample size to enable the researcher to generalise the findings of the study to the whole population confidently. The research sample must meet the precision requirement in which (some info missing here) and a confidence level of 95 percent. Sekaran, (2006, p. 296) has quoted that "there are some factors affecting decisions on sample size including the confidence interval, the confidence level, the amount of variability in the population, the cost and time constraints and the size of the population". On the other hand, Cooper and Schindler (2008) have also specified some principles in influencing sample size decision which conclude that the greater the desired precision and the smaller the desired error of estimates, the larger the sample size needs to be provided.
This study applied the simple random sampling to select sample companies from a population of 649, 636 and 634 companies listed on the main board of Bursa Malaysia in 2006, 2007 and 2008 respectively. It also checked against the availability of the annual reports for each sampled year which were 2006, 2007 and 2008 to measure the influence of the companies' resources on CSR disclosures.
Sekaran (2009) suggested 242 sample size for a 650 population size which has considered all the precisions and confidence levels. This is supported by Raosoft Inc. (2010) and Creative Research Systems (2010) who provided a sample size calculator to simplify the researcher's work in determining the right sample size for his research.
Based on this method, 250 public listed companies with the financial year ending 31 December were randomly selected to eliminate the element of biasness in the sample selection. However, companies which did not have a complete set of annual reports from 2006 to 2008 or were delisted from the main board in 2008 were excluded from the sample thus leaving 242 companies as the sample.
In addition, the companies' resources which were tangible assets and intangible assets, leverage and ROA information were extracted from the data stream. Meanwhile the extent of CSR disclosures which is measured by the number of words disclosed were extracted from the annual reports and counted using Microsoft Word's word count. On the other hand, the government ownership and family ownership information were extracted from their annual reports which were downloaded from Bursa Malaysia's website.
The non-financial companies were excluded from these samples due to the different regulatory requirements and also the material difference in their types of operations (Ahmed & Courtis, 1999; Cheng & Courtenay, 2006; Depoers, 2000; Gray et al.,1995; Raffournier, 1995). Even though the percentage of these samples was small, 152 companies were chosen because they had an adequate level of resources to examine the influence of the companies' resources on the corporate responsibility disclosures in an economic crisis.
Besides that, the financial data were retrieved for a 3-year period from January 2006 to December 2008 to assess the disclosure trends among the public listed companies after the launching of Silver Book in 2006 and during the global economic crisis from 2007. The government has provided the guidelines and principles through the launching of the Silver Book in 2006 to help Government-Linked Companies (GLCs) in managing and assessing the CSR activities for the benefits of their stakeholders at large.
This Silver Book is hoped to improve the level of CSR disclosures among the GLCs and eventually encourage other companies to become active role models for community development especially in the global economic crisis. Therefore, there is a need to review the companies' disclosures of CSR in 2007 and 2008 to analyse the influence of the scarcity of resources in the economic crisis on the CSR activities among the public listed companies in Malaysia.
Measurement of Variables
The right measurement for each dependent, independent, mediating and control variables is important to ensure that accurate results can be generated in order to achieve the objective of this study. Word count is used to measure the number of CSR information disclosed in the annual reports (Darus et al., 2009).
In addition, tangible and intangible assets are measured by using the closing amount of tangible and intangible assets disclosed in the balance sheets. On the other hand, the mediating variables which comprise of family ownership is measured by calculating the percentage of family members sitting on the board over the total number of BOD (Darus et al., 2009). Another mediating variable is the government ownership which is measured by calculating the percentage of shares owned by government agencies like Khazanah Nasional, PNB, KWSP, LTAT, LTH and MKD over the number of shares issued (Darus et al., 2009).
The two control variables are leverage ratio and profitability. The leverage ratio is measured by dividing the total amount of debts with the total amount of assets (Xiou & Yuan, 2007; Rashid & Lodh, 2009). The level of the companies' profitability is measured using ROA by dividing earnings before interest and taxes with the amount of total assets (Rashid & Lodh, 2009).
Table 1 Measurement of variables
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