INSTITUTIONAL INVESTORS AND CONSERVATIVE SUSTAINABILITY REPORTING: EVIDENCE FROM MALAYSIA
DOI:
https://doi.org/10.35631/AIJBES.829007Keywords:
Institutional Investors, Sustainability, Sustainability Reporting Quality, Conservative Disclosure, GreenhushingAbstract
Institutional investors are known to be effective external governance mechanisms that may influence sustainability reporting practices through their monitoring. However, the extent to which institutional investors improve sustainability reporting quality (SRQ) remains inconclusive. This study places particular attention to the heterogeneous effects of public (PBL_ii), private (PRV_ii), and foreign (FGN_ii) institutional investors on SRQ among 77 large non-financial companies with a market capitalisation exceeding RM2 billion listed on Bursa Malaysia as of 31 December 2015. The sample was selected because they were the first cohort subjected to the Bursa Malaysia mandatory sustainability disclosure requirement. Data were collected during the period of 2021 to 2023, when the sampled firms had accumulated at least five years of sustainability reporting experience, resulting in 231 firm-year observations. This study adopts a quantitative research approach. Data were analysed using fixed-effects panel data regression. with Driscoll-Kraay standard errors. The SRQ was measured using an SRQ index (SRQI) which were developed based on the Bursa Malaysia Sustainability Reporting Guide and Toolkits published in 2022. The findings revealed a significant and negative association between TOTAL_ii with SRQ. PBL_ii is positively associated with SRQ, however the relationship is insignificant. Negative and significant relationship is consistently observed across PRV_ii, and FGN_ii, suggesting the tendency towards more conservative sustainability reporting. These findings suggest that institutional investors are not homogenous group of investors and vary in the incentives to monitor. Some types of institutional investors are associated with a more cautious approach to sustainability reporting. This study contributes to the sustainability reporting and corporate governance literature by providing new evidence on the role of institutional investor heterogeneity in shaping sustainability reporting practices within an emerging market context.
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