The Awareness Of Insurance Companies In Malaysia Regarding Corporate Social Responsibility Accounting Essay

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The objectives of this study is to explore the awareness of insurance companies in Malaysia regarding corporate social responsibility (CSR) disclosure and to analyze the extent of CSR disclosure activities in Malaysia with regard of insurance industry. The sample selected from the list of licensed insurance companies from the Bank Negara Malaysia's website. The findings indicate that the insurance companies in Malaysia are aware of CSR disclosures and preferred using company's website to disseminate the CSR information. There is positive relationship between corporate social responsibility and company' size. In addition, the community theme is the most popular CSR disclosure while the least is environment theme. Then, the finding support that there is no significant relationship between ownership structure and CSR disclosure.


Many researchers done their research of corporate social responsibility (CSR hereafter) in developed and developing countries such as United Kingdom, Greece, Nigeria, Kenya, New Zealand and Malaysia (Day and Woodward, 2009; Obalola, 2008; Adams and Hossain, 1998; Janggu et al, 2007 and Mohd Nazli, 2007; Ponnu and Okoth, 2009). But most of them, not specifically do the research to selected industry like insurance industry (Obalola, 2008). This might due to insurance company is under financial sector and the presentations of the annual report are different from other sectors like trading, plantation and property sector. The preparations of financial statements of insurance industry are based on regulation set up by Bank Negara Malaysia.

The insurance industry in Malaysia is governed by Insurance Act 1966. Before that, the insurance industry was dominated by foreign insurance companies and slowly the numbers reduced and the increase of numbers of domestic or local insurance companies (Mansor and Radam, 1999). The researchers also stated that the growth of the insurance industry has contributed towards increased employment opportunities in Malaysia. Back to couple of the years, the insurance companies have tried to survive and catch the attention of policyholders in Malaysian business. Thus, the CSR disclosures play an important role to insurance companies to experience high growth over the years (Mansor and Radam, 1999). Van den Berge and Louche (2005) stated that the insurance sector presents some characteristic, which make it an interesting case for applying the analysis of CSR disclosure.

Nowadays, the insurance industry has widened in Malaysia. But, the awareness of the companies regarding CSR perception is likely 'warm' and not much responding the issues to the society (Nik Ahmad and Abdul Rahman, 2005). Since 2006, the public listed companies in Malaysia should disclose the CSR activities in the annual report that been regulated by Bursa Malaysia (Bursa Malaysia, 2006). This is to create awareness among the companies towards the stakeholders and society. In addition, the Ministry of Women, Family and Community Development had launched The Prime Minister's CSR Award in 2007, to recognise companies that have made a difference to the communities in which they are active through their CSR programmes. This programme encourages the companies to disclose the CSR activities and get 'value-added' to them when they are the winners.

The objectives of this study are to explore the awareness of the CSR disclosure in insurance companies and to analyze the extent of the CSR disclosure of insurance industry in Malaysia. Accordingly, this study is to answer the following research questions:

Are the insurance companies aware of CSR disclosure?

To what extent the CSR disclosure been implemented in insurance industry?

The reminder of the paper as follows. First section of this paper highlights the literature review and development of the hypotheses. The second section addresses the research methodology and the variables measurement. The fourth section presents the discussion of the results. Finally, the conclusion and limitation of this study.


Previous studies have been determined different theories in order to analyze and explain the corporate social responsibility. According to Moir (2001), there are three theories which might explain the CSR activities; stakeholder theory, social contract theory and legitimacy theory. Stakeholder theory is used to analyze the groups to whom the company should be responsible. Research done by Naser at al. (2006) based on Qatari companies, they used stakeholder theory to explain the variation in the extent of CSR disclosure.

A number of similar studies used legitimacy theory in attempt to explain the CSR disclosures (Naser at al., 2006; Mior, 2001 and Nik Ahmad et al., 2003). Naser et al (2006) stated that under legitimacy theory the company attempts to maintain its survival and continuity by voluntarily disclosing detailed information to society justifies the existing of the companies. Besides that, legitimacy theory is perception that the actions of the company are desirable (Mior, 2001). According to Nik Ahmad et al., (2003), the legitimacy theory is the manner in which the company runs its business and reports activities that influence the by the social values of the society and community.

Hypotheses development


The management of the companies in insurance industry should aware the CSR concept. Haron et al (2006) stated that trading and services and industrial product industry show high disclosure rate. While, Mohd Ghazali (2007) found that the industry and CSR disclosure is not significant. This might due to different industry focus on difference area and not aware of the CSR concept. The hypothesis is as follows;

H1 - The companies in insurance industry are aware of CSR disclosure.


The relationship of CSR and size of the company had been used by most of the previous researchers (Janggu et al, 2007; Ponnu and Okoth, 2009). Most of the previous studies found that, the larger the company, the more they disclose the CSR activities. Study done by Haniffa and Cooke (2005) and Janggu et al (2007) stated that there is significant relationship between size and CSR disclosure. This relationship also supported by Naser et al. (2006) that CSR disclosure is associated with the firm size. But, contradict to Ponnu and Okoth (2009), there is no significant relationship between firm size and CSR disclosure. Thus, the difference in that finding, size is the next variable to develop hypothesis.

H2 - The CSR disclosure in insurance industry is positively related to the size of the company.

Theme area

Bursa Malaysia stated four main theme areas for CSR practice; environment, community, workplace and marketplace. These themes are very important to determine the strategic CSR disclosure which related to the relationship to customers and rivals (Porter and Kramer, 2006). Day (2009) also being used these four themes to examine the disclosure of CSR in the financial sectors in UK while Ponnu and Okoth (2009) in Kenya. Janggu et al (2007) found that, the most popular theme disclosure is human resource followed by environmental information and the least theme is information on companies' involvement with community. While, Nik Ahmad et al (2003) found that, the most disclosure themes are area of product and consumers followed by workplace. Haron et al (2006), stated that the highest number of disclosure is human resource theme. Ponnu and Okoth (2009) found that the Kenyan companies more likely to disclose information regard to community involvement and followed by product and consumers. Therefore, the overall argument leads to the following hyphothesis;

H3 - There are no significant relationship between CSR disclosure and theme area of CSR

Ownership structure

In line with previous studies, the researchers examined the ownership structure with the extent of CSR disclosure (Janggu et al, 2007; Mohd Nazli, 2007; Darus et al, 2009). In Malaysian insurance ownership structure, the company may be categorized into two groups. There are local and foreign ownership. Local ownership means the insurance company is incorporated in Malaysia and own by the local citizen. While, foreign ownership means the insurance company is incorporated outside Malaysia but running and has the business operation inside Malaysia and owned by the foreign citizen. These type of companies also known as multi-national company. According to Janggu et al (2007), the local ownership companies disclose more information than foreign ownership companies. Then, Darus el al (2009) also stated that the foreign ownership is insignificantly related to the CSR disclosure. So, the next hypothesis is;

H4 - There are no significant relationship between CSR disclosure and ownership structure of the company



Data were collected through report of annual report and companies' website. The sample selection of companies based on simple random sampling. The selected samples are from life, general, and life and general business companies. The lists of licensed insurance companies are obtained from the Bank Negara Malaysia website. Thus, only five companies had been selected and accepted. Then, the annual reports of each company for four years were downloaded from the company's website. Additionally, the data findings were supported with the empirical articles and case study worldwide which are related to the CSR and insurance industry.

All relevance files and documents regarding CSR disclosures were downloaded. Like previous study, the content analysis was used in this study (Ponnu and Okoth, 2009; Mohd Ghazali, 2007; Nik Ahmad et al, 2003; Janggu et al, 2007; Darus et al, 2009; Haron et al, 2006). Some studies used interviews and surveys to collect the data (Nik Ahmad and Abdul Rahman, 2005). Due to the time limitation and short period, the interview session or survey cannot be conducted.

Method (Variable measurement)

Dependent variable

The dependent variable in this study is level of CSR disclosure. The measurement used is the number of words in the corporate annual reports for year 2006 until 2009. When the companies larger and profitability in theme of size, more reporting the CSR activities and not depending on the ownership structure, thus the level of CSR disclosure will increase as well as the awareness among the companies.

Independent variable

Location of CSR disclosure

The awareness of the insurance companies regarding CSR disclosure is tested using the location of the CSR reporting, either in the annual report or in the website. According to William and Ho Wern Pei (1999) stated that Australian and Singaporean firms disclose significantly more CSR information on website than in annual reports while Hong Kong and Malaysian companies did not provide any significant differences. The location of CSR disclosure in the annual report is found out from CSR section and Chairman's Statements. While, in the company's website found out from CSR, events or community charity.


Size of the company measured by total assets. Most previous studies used total assets to measure the size. Naser et al. (2006) had used company size to measure the level of CSR disclosure and measured by the firm's market capitalisation, business risk and corporate growth. In this study used total assets and total revenues of the companies in measuring the CSR disclosure.

Theme area

Bursa Malaysia had establish four focal area that the companies should focused; environment, community, marketplace and workplace. These focal areas have same importance and significant meaning for the company itself and the stakeholder as well as the public. The measurement for the theme areas are based on the activities involve or done by the companies from year 2006 until 2009.

Ownership structure

Companies ownership also one of the importance characteristics of CSR disclosure. This is because the ownership structure can affect the CSR reporting and activities (Janggu et al, 2007; MOhd Ghazali, 2007, Darus et al, 2009). In this study, the ownership structures are based on foreign and local ownership that are different in term of incorporated inside or outside Malaysia. When the companies incorporated outside Malaysia, they tend to disclose more CSR to ensure that the being accepted by the society and in the industry as well.

Thus, the measurements of independent variables are given in Table 1.

Table 1

Construct of the independent variables

Explanatory variables


Awareness of CSR disclosure (AWARE)

The location of CSR disclosure; annual report or company's websites

Size of the company (SIZE)

Proxy: Total assets and revenues

Themes area (THEME)

The activities done by the companies based on four themes areas

Ownership (OWN)

The ownership is either local or foreign ownership


Most of the company discloses their CSR in the company's website and in the annual reports. This is due to easily to the stakeholders to know the activities done by the company. The results also prove that year 2009 is the most reported of CSR disclosure among the four years. Although in year 2009 the economy is not 'boom' economy, but the companies' management tried their best to disclose the CSR reporting and involve the CSR activities.

The awareness and understanding of the companies regarding CSR concept is measured by the location of CSR disclosure. The result of H1 indicates that, most of the companies (100%) are aware the CSR concept and disclose the activities in the websites and annual reports. About 40% of the companies only reported on the annual reports and at the same time have the CSR section. Then, it can be concluded that they are more preferring used websites to reveal or to demonstrate the activities to the stakeholders and the public. This is might due to the website itself are more easy to update the activities and disclose to others. Furthermore, 60% the insurance companies are prefer to use term like 'corporate social responsibility' and 20% used term 'charity community' and 'event' in the company's website. The awareness of the CSR has increase due to education and heightened of the issues by the media and public.

The result of this study indicates that the size of the company significantly related to CSR disclosure. Thus, H2 regarding the CSR disclosure in insurance industry, is positively related to size of the company. The larger the company, the more likelihood to disclose the CSR (Day and Woodward, 2009). For example, when the company became larger and make more profits, they tend to disclose more CSR disclosures to maintain the trustworthy of the stakeholders. Furthermore, they are trying to sustain the CSR reporting and be in the market among the competitors are very difficult. Small and less profitable business companies are lack of informations and may be due to cost constraints to disclose more CRS (Ponnu and Okoth, 2009).

The most popular theme of CSR disclosure in insurance industry is community. Then, followed by workplace theme. The community theme reported by most of the companies such as, 'donation', 'charity' and 'sponsorship'. The least disclosure theme is environment. This result (H3) is consistent with the study done by Haniffa and Cooke (2005) and Janggu et al. (2007). This is might due to the insurance industry is directly and need to maintain the relationship with their customers. Moreover, the insurance companies usually choose a strategic position in CSR disclosure which the activities are differently from the other insurance companies (competitors) and benefit the companies as well as the society (Porter and Kramer, 2006).

Result of H4 shows that no significant relationship between CSR disclosure and ownership of the company. Both foreign and local insurance ownership company discloses the CSR activities in their annual report and website. This is due to laws and regulation that all companies in Malaysia should disclose the CSR activities in the annual report. The location is mostly at the Chairman's Statements and CSR section.

Overall, the implementations of CSR in insurance industry are successful. Since CSR framework issued by Bursa Malaysia, all listed companies disclose and practiced the CSR activities. But, the companies in insurance industry should more concern in the environment area and not focusing only on community and workplace area. This is to show the accountability of the companies to the public in order to gain the trustworthiness of the societies.


The objectives of this study are to explore the awareness of the CSR disclosure and to analyze the extent of the CSR disclosure of insurance industry in Malaysia. Awareness and understanding the concept of CSR is vary from individual to another (Nik Ahmad and Abdul Rahman, 2005). But, the management of the companies (board of directors) should emphasize equally the four focal area that been issued by the Bursa Malaysia since 2006 in order to be internationally. The effort of government to ensure the listed companies in Malaysia are socially and ethically responsible to the stakeholders and society, thus, had launched the Prime Minister's CSR Awards.

The findings of this study provide that the companies in insurance industry are aware the concept of CSR disclosures. They are more like to disclose the CSR information through the companies' website rather than annual reports. Then, the size of the company and the CSR disclosure is significantly related. The community theme is the most popular theme or reported in the insurance industry and followed by the workplace theme. While, the result shows that there is no significant relationship between ownership structure and CSR disclosure in the insurance industry.

CSR activities are not just 'frame' to the company but it is an accountability of company to the stakeholders and society as a whole (Janggu et al, 2007). In addition, corporate governance plays an important role in CSR disclosure and practice in company (Van den Berge and Louche, 2005). The companies should take serious actions to enhance the effectiveness and efficiencies of the CSR activities. Thus, at the mean time, it would attract the potential shareholders to invest in the companies.

Besides that, the companies also might established or introduced the CSR Committee team to ensure the CSR activities provide by the companies are effectively done and benefit to the public. For example, among the five selected companies, only one company, that is Lonpac Insurance Bhd has their own CSR Committee team. From the company's website stated that, this team was set up in 2008 and the term of reference is 'to carry out Corporate Social Responsibility activities in line with the CSR Vision'. In order to this, all listed companies should have their own CSR committee that responsible and manage the CSR activities of the companies. The public is becoming increasingly more aware of the need for businesses to be socially responsible (Nik Ahmad et al., 2003).

Finally, several limitations had been noted. First, is regarding selection of the companies. It is very small and cannot represent the insurance industry in Malaysia as a whole. Furthermore, this study is focuses only on insurance industry and the findings cannot be generalized to other industries. Second, this study is focused only on companies' annual report and company's websites. Data gathers are solely from annual reports and websites. Other possible sources documentation such as press release, flyers, promotional leaflets are exclude from this study. Future research should be done through primary data like questionnaire, to be more reliable and from point of view of the company's manager itself regarding the CSR disclosure in their company.