Investigating the Relationship between Corporate Governance and ...

Jordan Journal of Business Administration,Volume 12, No. 1, 2016

Investigating the Relationship between Corporate Governance and Internet Financial Reporting (IFR): Evidence from Bahrain Bourse Zakeya Redha Sanad1 and Abdalmuttaleb M.A. Musleh Al-Sartawi2

ABSTRACT Due to globalization and advanced technology, corporate Governance and internet financial reporting (IFR) are becoming increasingly important topics as more companies are expanding globally and the economies are becoming closely interrelated. Kingdom of Bahrain as part of the developing countries had paid a lot of attention to corporate governance recently. Therefore, this study investigates the relationship between corporate governance and internet financial reporting. Extensive literature review was carried out and a multi-regression analysis was used in order to investigate the relationship between corporate governance and internet financial reporting for the companies that are listed in Bahrain bourse. The findings indicate that the relationship between corporate governance and internet financial reporting is weak due to the fact that the board characteristics do not affect the level of disclosing information via the internet (IFR). However, the board size and big4 companies have a positive relationship with IFR. The study recommends that regulatory bodies should develop a guideline of disclosing information through the internet in order to enhance the corporate transparency level among Bahrain listed companies. Keywords: Internet financial reporting; Corporate Governance; Voluntary Disclosure.

scandals and to be more precise, after the financial crisis

INTRODUCTION

in 2008, firms started to pay more attention to improve Due to globalization, the world is becoming more as

their corporate governance structure (Mousa&Desoky,

a small village. News, technology, cultures, businesses

2012).

and economies over the world can be shared easily

Therefore, people started to demand for acquiring

because they are interrelated and interdependent. Many

timely and transparent information. The rise of the internet

investors prefer investing abroad because it might have

had helped investors to acquire financial information about

better opportunities, and certainly, technology is making

the current and potential investment chances. According to

the borders between all the countries disappear.

Abdelsalam and Street (2007), internet is a vital tool in

However, an unexpected financial scandal in one

order to promote an appropriate operations of the financial

country may affect the others. After the global financial

markets by improving companies’ capability to offer the investors with updated information. Furthermore, Khan

1

Lecturer; Department of Accounting and Economics; College of Business and Finance; Ahlia University; Kingdom of Bahrain, PO.BOX 10878; Email: [email protected]. 2 Assistant Professor ; Department of Accounting and Economics; College of Business and Finance; Ahlia University; Kingdom of Bahrain, PO.BOX 10878; Email:[email protected]. Received on 20/5/2015 and Accepted for Publication on 3/11/2015.

and Ismail (2011) mentioned that the most crucial characteristic of the internet is that information can be accessed from everywhere and at any time. In addition, Hodge et al. (2004) noted that any technology that promotes a substitute presentation formats for the financial information might support the investors in collecting the

- 239 -

© 2016 DAR Publishers/University of Jordan. All Rights Reserved.

Investigating the Relationship…

Zakeya Redha Sanad and Abdalmuttaleb M. A. Musleh Al-Sartawi

information required, improving the information disclosure

countries. For that reason, countries have improved their

transparency, and affect the investor decision process.

corporate governance practices (Al-shammari& Al-

Moreover, as stated by Lymer et al. (1999), public

Sultan, 2010). Bahrain, as part of the developing capital

reporting of financial and operating information by a

market, has paid a lot of attention to improving its

firm using the related internet based communications

corporate governance policies recently. According to the

medium or World Wide Web is called internet financial

country’s official site, its geographical location is

reporting (IFR). Besides, Lizzcharly et al. (2013) added

considered as the heart of the Gulf. Therefore, it helps in

that IFR is a disclosure of some of the financial

making quick and efficient access to every market in the

statements reporting through the use of technology such

region. Bahrain is always aiming at attracting domestic

as web tools analysis and multimedia. Moreover,

and foreign investors using different ways, like having

according to Basuonyand Ehab (2014), large size

no personal or corporate income tax. Additionally,

companies favor to disclose high level of information to

Bahrain offers 100% foreign ownership of real estate in

lower the information asymmetry and decrease the

almost all sectors and business assets.

agency costs. Also, they added that large companies

Additionally, in order for Bahrain to attract more

prefer to disclose information using the internet in order

investors locally and internationally, it started applying

to gain from the lower costs that result from these

the corporate governance code to make sure that all

companies having the required resources to do.

firms are aligned with the suitable mechanisms that are

Moreover, Juhmani (2013) stated that disclosure plays

related to corporate governance. According to Bushee et

an

by

al. (2014), institutional investors have several incentives

disseminating reliable and transparent information to

that would encourage them to invest in firms that use

shareholders and stakeholders. In addition, IFR can be

better corporate governance mechanisms. Furthermore,

considered as a voluntary disclosure tool because it is

many studies had examined corporate governance in

disclosed via the internet. Similarly, according to

Kingdom of Bahrain such as the studies that were

Oyelere

&Kuruppu (2012), the internet can be

conducted by Hussain and Mallin (2002), Mousa and

considered as a channel for voluntary communication of

Desoky (2012), Ramadhan (2012), Hamdan et al.

financial information. Also, Xiao et al., (2004) revealed

(2013),Al-Sartawi(2015)and Al-Sartawi&Sanad (2015)

that internet financial reporting is voluntary and greatly

in

unregulated.

(2002)

governance between all interested parties who invested

mentioned IFR is an embodiment of corporate total

or are planning to invest in kingdom of Bahrain.

disclosure that is aimed at lowering information

Nonetheless, few studies have studied the factors that

asymmetry between shareholders and managers of any

determine IFR and its practices in Gulf Cooperation

firm. Thus, IFR can help in reducing the agency problem

Council (GCC) countries and Bahrain such as the studies

(Ojah, 2012). Consequently, IFR would contribute in

by Joshi and Al Bastaki (2000) and Ehab (2010).

effective

role

in

Moreover,

corporate

Debreceny

governance,

et

al.

enhancing corporate governance of the firms.

order

toincrease

the awareness of

corporate

However, based on prior studies, there are limited

Research problem and research questions

studies that had linked the internet financial reporting

Corporate governance failures had a lot of damages

with corporate governance in The Kingdom of Bahrain.

on the capital markets of the developed and developing

Accordingly, this study will investigate the relationship

- 240 -

Jordan Journal of Business Administration, Volume 12, No. 1, 2016

between corporate governance and internet financial

are listed in Bahrain Bourse that use internet financial

reporting of Bahrain listed companies. Thus, the

reporting and if the information presented in their

research questions are as follows:

websites are reliable and linked to the corporate

1.

governance code in Bahrain.

What is the level of internet financial reporting in

This

Bahrain listed companies? 2. 3.

research

focused

on

the

elements

and

What is the level of corporate governance in

information that are available in the companies’ websites

Bahrain listed companies?

and based on that all companies will benefit from this corporate

report because they can recognize the defaults that their

governance and internet financial reporting in

websites have and try to improve it. Besides, previous

Bahrain listed companies?

studies focused on the factors that are related to IFR

Is

there

a

relationship

between

Significance and Contribution

such as studies by Almilia (2009) and Basuony&

This study contributes to the existing studies in many

Mohamed (2014). Nevertheless, only few studies

ways. We are not aware of any previous studies that

focused

investigate

corporate

mechanisms as the determinants of internet based

governance and internet financial reporting in Kingdom

disclosure like the Kelton et al. (2008) that tested the

of Bahrain. Moreover, many different studies had tested

impact of corporate governance on internet financial

the association between corporate governance and

reporting.

the

relationship

between

on

investigating

corporate

governance

disclosure in traditional financial reporting such as Li &

Finally, based on previous studies, the different

Qi (2008). However, this research will test the new

levels of transparency of the online financial disclosures

trend in financial reporting using the internet instead of

can affect the decision making process by the investors

the traditional financial reporting. In addition, internet

(Hodge et al., 2004).As a result, investors will be more

financial reporting as mentioned in previous studies is

confident about the information presented in the

voluntary and greatly unregulated (Xiao et al., 2004).

companies’ websites and then they can make their

Also, it is important to investigate the relationship

investment decision more easily with consuming less


time than before. Furthermore, all listed companies who

reporting because the content in the IFR is prepared on a

did not update their websites would improve and update

timely basis and it is expected to be different than the

their websites in order to attract more investors.

content of the traditional annual report that is prepared on a yearly basis. Therefore, the study is very important

Research objectives

and it would add more insights about this relationship in

The main aim of this research is to address the following objectives:

the literature.

1.

Moreover, this study will provide an evidence for

To determine the level of internet financial reporting of Bahrain listed companies.

regulators to oversee the general practices of the current 2.

IFR in companies that are listed in Bahrain Bourse, in

To measure the level of corporate governance of Bahrain listed companies.

particular because Bahrain government had just recently 3.

started to apply its corporate governance code. Also, all

To

investigate

the

relationship

between

corporate governance and internet financial

stakeholders will benefit by recognizing companies that

- 241 -



defined

reporting of Bahrain listed companies.

corporate

governance

Firms started to focus more on the corporate

organizations that assign resource and power control

governance structure after the global financial scandals

among the participants. Nevertheless, Organization for

and to be more precise, after the financial crisis in 2008

Economic Cooperation and Development - OECD

(Mousa&Desoky,

Moreover,

(2004) had defined corporate governance as “a set of

Rabelo&Vansconcelos (2002), Ahunwan (2002), and

relationships between a company's management, its

Kiel & Nicholson (2003) all agreed that financial crisis

board, its shareholders and other stakeholders that

has raised concerns over the effectiveness of financial

provides the structure through which the objectives of

reporting, accounting standards, corporate governance

the company are set, and the means of attaining those

and accountability. In addition, Dharmadasa, et al.

objectives and monitoring performance are determined"

(2014) added that corporate governance issue arose in

(OECD 2004; 13).

the recent years as a result of financial scandals and

Consequently,

corporate

within

processes,

structures,

unethical business practices by firms all over the world.

institutions

the

Theoretical literature

2012).

and

as

governance

andaround

helps

in

reducing unethical business practices by increasing the

Several studies had examined how information

transparency of the disclosure. According to Juhmani

asymmetry and agency problems can be eliminated

(2013), when there is no transparent disclosure about a

through increasing the transparency of disclosure. Yue-

company's performance to its owners, this would lead to

Duan, et al, (2007) considered that in order to defend the

corporate governance. Both Ajinkya et al. (2005) and

investors' rights and improve data transparency, the

Juhmani (2013) agreed that corporate governance would

information intermediaries and regulatory bodies have

impact the transparency of the disclosure to the

employed huge efforts to promote corporate governance

stakeholders.

and also to eliminate the agency problem. Similarly,

Furthermore, a number of studies mentioned that

Mousa&Desoky (2012) mentioned that companies

corporate governance could have an effect on the firms’

disclose information related to corporate governance in

performance. Since that the board is considered one of

order to eliminate monitoring costs and information

the most significant corporate governance tools in order

asymmetry.

the

to monitor the managers’ actions (Fama, 1980).

confidence of the investors in the reported financial

According to Al-Matari, et al. (2012), corporate

information. Similarly, Basuony& Mohamed (2014)

governance mechanisms that might have an effect on

argued that large size firms tend to disclose more

firm

information

information

independence, CEO duality, board size, audit committee

asymmetry and agency costs. Also, their study showed

size, and audit committee activities. In addition, different

that large size companies prefer to disclose data using

studies have shown that good corporate governance

the internet because they can take an advantage of

practices directly effect on corporate performance

lowering the cost that results from companies having the

measured by the economic value added (Nur’ainy, et al.

resources to do so.

2013). On the other hand, Dharmadasa, et al. (2014) had

Therefore,

causing

a

this

would

reduction

improve

in

performance

include

audit

committee

Corporate governance still does not have a universal

measured the firms’ performance based on the boards’

definition (Manolescu, et al. 2011). Davis (2005) had

characteristics and the results of their study revealed that

- 242 -


firm

voluntary disclosure in line with a higher level of

positive

corporate governance application and awareness. In

relationship between board independence and firm

addition, Botosan (1997) found that annual reports that

performance.

are published by companies are considered as very

larger

boards

performance.

had

a

negative

Furthermore,

impact

there

is

on

a

important sources of information to outsiders.

Besides, there are several prior studies that explain governance

Due to advanced technology, a new way of

mechanisms in companies. As stated by Tai (2015),

communicating with the investors and shareholders is

corporate governance helps the firm to use the resources

created which is the internet. Kelton et al, (2008) noted

efficiently and it would reflect on a fair return for the

that the internet is a distinctive disclosure tool that

investors. He further added that high level of corporate

promotes different forms of presentations and allows

governance

the

fast, wide, and cheap communication to the interested

performance and the efficiency of the company by

investors (Kelton et al, 2008). People have started using

allocating the firms' resources and by having a better

the internet for business purposes since the early 90’s

management in the firm. Moreover, Madhani (2007)

and companies started to realize its importance in

mentioned that high level of corporate governance is the

disseminating the financial information in the mid 90’s.

essential key in order to have a continuous growth and a

(Petravick and Gillett 1996, Booker et al., 1997 and

sustainable competitive advantage.

Koreto, 1997). According to Khan and Ismail (2012),

the

benefits

of

improving

would

corporate

contribute

in

enhancing

internet has become one of the most popular sources of

Additionally, a number of studies were conducted to examine the impact of family firms and concentrated

getting

ownership

as,

financial reporting is becoming less effective compared

Dharmadasa et al (2014) study that revealed family

to the usage of internet financial reporting. Almilia

directors was not significant in increasing the firm

(2009) stated that electronic-based reporting remove the

performance.

restrictions of paper based reports. As a result,

on

corporate

governance.

Such

the

information.

Consequently,

traditional

Many studies argued the relationship between

traditional paper-based corporate reporting has become

corporate governance and the transparency of the

less effective for decision makers. According to Purba et

information disclosure. According to Alhazaimeh et al,

al. (2013), companies that use the internet in order to

(2014) accounting disclosure is a very crucial source of

report their financial information to all interested parties

information to all shareholders and stakeholders as it

is called internet financial reporting (IFR). There are various definitions for IFR offered by

reduces ambiguity and helps them to make their appropriate

investment

and

financial

different researchers. According to Poon & Yu (2012),

decisions

IFR is the use of the firms’ web sites in order to

(Alhazaimeh et al, 2014). Furthermore,

solid

corporate

disseminate

governance

information

about

their

financial

mechanisms encourage managers to disclose further

performance. IFR can also be defined as the public

information and this is because it can improve the

reporting of financial and operating data by a business

monitoring of the managers’ disclosing strategies

enterprise by the related Internet-based communications

(Madhani, 2014). Another study by Alhazaimeh, et al,

medium (Lymer et al.,1999). Moreover, other authors

(2014) revealed that there is a substantial level of

explained IFR as the disclosure of the financial

- 243 -



statements reporting through the use of technology such

Williams and Pei (1999) mentioned that there are

as multimedia and Web tools analysis (Lizzcharly, et al.

many advantages of using internet reporting such as, the

2013). Additionally, other authors such as Ashbaugh, et

information is available to all users 24 hours a day; small

al. (1999) stated that IFR is seen as a means of effective

companies could have international contacts; the

communication

and

information can be translated into multiple languages in

shareholders. Also, Hunter and Smith (2010) stated that

few seconds; the ability to create one to one relationship

Internet Financial Reporting refers to the use of a

with

company’s web-sites in order to distribute information

communication;

about the companies’ financial performance.

dissemination; flexibility to move the site to another

to

investors,

customers,

interested

parties; lower

interactive cost

of

and

fast

information

location; and could have interactive graphic and audio.

Based on what was mentioned above, since different studies concluded that corporate governance can affect

Furthermore, Khan and Ismail (2012) mentioned that

the information disclosure and a number of studies

there are key benefits to the users who use the internet

mentioned that firms are using the internet in order to

for getting the financial information of companies which

disclose their financial information (Purba et al, 2013),

are: it provides information for company cheaply,

the researchers decided to investigate the relationship

facilitates the investment decision process, enhance


timeliness and improve efficiency in gathering the

reporting.

financial information. The study suggested that there are

A single study by Kelton et al, (2008) investigated

three factors that are considered important by the

the relationship between corporate governance structures

responding companies to engage in internet financial

and the disclosure transparency assessed by the

reporting such as, competitors in the industry, enhance

performance level of (IFR) Internet financial reporting.

corporate image and company teller with the technology

Corporate governance was measured by specific aspects

development. IFR can be faced by different challenges. According

such as ownership structure, shareholder rights, audit committee

characteristics

and

board

to Khan& Ismail (2012) and Basuony& Mohamed

composition.

Furthermore, the authors measured the disclosure index

(2014),

integrity

and

security

of

the

financial

transparency by the extent of each sample firm’s IFR by

information that are published on the company’s website

presentation layout, corporate governance disclosures

are one of the main challenges faced by firms using

and information content. They examined firm’s websites

internet to distribute their financial reports. Therefore, as

that are traded on the National Association of Securities

stated by Almilia (2009), companies should ensure the

Dealers Automated Quotations (NASDAQ) market. The

security of the financial information when it is presented

study concluded that corporate governance structures

through the internet.

impact the firm’s Internet disclosure performance,

In addition, different studies have determined the

furthermore in response to the information provided

factors that affect the internet financial reporting. For

asymmetry

the

instance, Almilia (2009) used firm size, profitability and

stakeholders. In addition, the analysis showed that the

leverage in order to uncover the factors that affect the

correlation between corporate governance and IFR

use of internet financial reporting. Also, Basuony and

differs with the firm’s size.

Mohamed (2014) added more factors that would affect

between

management

and

all

- 244 -


IFR in their study which are firm size, return on assets,

for

leverage,

performance, they can increase the board size and reduce

industry

and

auditor

type.

Corporate

GCC

countries

to

improve

their

financial

the block shareholding.

governance has become an crucial issue in the emerging economies (Millstein, 2003). The main aim for emerging

On the other hand, Basuony and Mohamed (2014)

economies to consider establishing corporate governance

mentioned that IFR is a fast growing phenomenon in the

is the need to build investors' confidence in order to

western countries. Almilia (2009) stated that there is

expand their economy and attract local and foreign

growing empirical studies on IFR since 1995. However,

investments (Abhayawansa& Johnson, 2007).

it is still not very much popular in the GCC countries. They also noted that there are few empirical studies that

Due to the openness of the economies of the GCC countries

with

the

global

economy,

the

investigated IFR in the Middle East.

inter-

connectedness of the foreign markets, the growing

The Kingdom of Bahrain is one of the most leading

presence of international firms in the region, increasing

economies in the region and it is one of the worlds’

number of western expatriates in senior management

leading finance centers (Baena, 2011). Despite the small

positions and the increasing integration of GCC

size of the Bahraini market (48 listed companies)

countries and adoption of international standards, the

compared to its surrounding neighbors, Bahrain bourse

GCC countries are being more concerned about

attracts many investments and can compete with them.

corporate governance issues and standards.

Moreover, it always tries to create a suitable

Based on a Hawkamah-IIF comparative survey that

environment to attract foreign investors in order to

was conducted in year 2006 about corporate governance

diversify and enhance its economy (Mousa&Desoky,

in GCC countries, Oman, Saudi Arabia and Kuwait are

2012). Bahrain Stock Exchange was established in 1987,

having better corporate governance frameworks than

and then, it was replaced by Bahrain Bourse as a

United Arab Emirates, Qatar and Bahrain. There are

shareholding company in 2010.

different factors that helped in delaying the development

Therefore, it has established its corporate governance

of corporate governance in the GCC countries. Some of

code in 2011 in order to make the corporate governance

the reasons are the dominance of family owned

systems more understandable and transparent and as a

companies and underdeveloped capital markets with

result, it would attract more international and local investors

weak regulatory environment. Moreover, another study

in Bahrain (Hussain and Mallin, 2003). Similarly, Mousa

about IFR was conducted in Oman in 2007 by Oyelere

and Desoky (2012) noted that the purpose of this code is to

and Mohamed indicated that IFR is still at an early stage

make sure that corporate governance system is transparent

in Oman and there are many opportunities and

and understandable for all stakeholders in Bahrain and

challenges for the stakeholder in corporate reporting. On

internationally. Nevertheless, Ramadhan (2012) noted that

the other hand, a study that was conducted in United

Bahrain corporate governance code is based on comply and

Arab Emirates - UAE by Miniaoui (2013) revealed that

explain principle which considers that each company is

the most significant predictors of IFR adoption in UAE

expected to comply with the code or justify its non-

listed companies are the leverage firm size, profitability

compliance. Nonetheless, a number of studies focused on aspects

and industry sector.

of governance such as ownership structure and board

In addition, Tai (2015) recommended that in order

- 245 -



composition in Kingdom of Bahrain. Hussain and Mallin

link between the two issues internationally. For example,

(2002) had examined the role of directors in corporate

Kelton et al (2008) had used companies that are listed in

governance in Bahrain using companies that are listed in

NASDAQ in order to test the impact of corporate

Bahrain Bourse as a sample of their study.

governance on Internet Financial Reporting.

On the other hand, Mousa and Desoky (2012) argued

Accordingly, this study would be an important

that ownership structure and board characteristics have a

contribution in filling the gap in the current literature by

substantial effect on corporate value and their study also

examining

recommended that policy makers should consider the

governance and internet financial reporting of companies

institutional environment and the characteristics of the firms

that are listed in Kingdom of Bahrain Bourse.

the

relationship

between

corporate

before they apply any corporate governance alterations. In addition, Ramadhan (2012) argued that one of the key

Hypothesis Development

obstacles for carrying out corporate governance is the

a.

absence of information and the lack of understanding the

Beasley (1996) noted that the number of independent

Corporate Governance Independent Variables

directors of the board of directors is positively associated

role of board members and external auditors. On the other hand, IFR phenomenon has little

with the board’s ability to influence the disclosure

empirical studies in Bahrain. Such as the studies that

decisions. In addition, according to Bushee et al. (2014),

were conducted by (Joshi and Al Bastaki, 2000, Basuony

the combination of the CEO and the chairperson

and Mohamed, 2014). Joshi and Al Bastaki (2000)

positions is considered as ineffective governance

provided a useful study on how banks in Bahrain

because it reduces the probability that the board will

voluntarily disclose their financial information via the

objectively monitor the managements' behavior. On the

internet. They also examined the relationship between

other hand, Thangatorai et al. (2011), Kelton& Yang

the extent of financial disclosure and the key factors

(2008) and Yap et al. (2011) studies revealed that the

influencing the disclosure by banks. Their study

separation of the chairman of the board and CEO does

concluded that 63% of the banks in Bahrain had their

not explain IFR.

websites on the internet and 82% of the banks had

Kelton& Yang (2008) had studied the impact of

presented their accounts on the website in detailed form.

Corporate Governance on internet financial reporting

In addition, banks with large sizes are more likely

using NASDAQ listed companies. The findings revealed

prepared to distribute their financial information using

that the mechanisms of corporate governance influence

the internet. Nevertheless, profitability and industry type

the firms’ disclosure transparency. In addition they also

are important factors that would affect their decision in

added that the association between corporate governance

disclosing their financial information using the internet.

and IFR varies with size. Also, they concluded that IFR

However, there are limited studies that joined

is more likely for firms that have weak shareholder

corporate governance and internet financial reporting in

rights, a higher percentage of independent directors, a

order to investigate their relationship together in

lower percentage of block-holder ownership, a higher

Kingdom of Bahrain. Nonetheless, limited studies have

percentage of audit committee members that are experts

joined corporate governance and internet financial

and a more diligent audit committee. Based on Hamdan

reporting and examined whether there is any possible

et al. (2013) study and Institutional Shareholder Services

- 246 -


the

the information on how to use the latest display in

researchers had adopted variables that measure the

distributing the companies’ corporate information and

boards characteristics and the level of the company’s’

website design. Furthermore, the presentation dimension

ownership.

the

assists in providing the information on the usage of the

independency of the board members, separation of the

most updated display criteria in distributing information

chairman and CEO and board size. Ownership level was

and the company web design.

Inc.

(ISS) research

Board

and

recommendations,

characteristics

included

measured by the boards’ ownership, the ownership of

The IFR index, in the Appendix, consisted of 89 items,

the top 3 stockholders in the company, in addition to the

including 71 items of content and 18 items of presentation

highest stockholder ownership.

format. The researchers had selected these items based on

b.

three previous studies’ checklists, Kelton& Yang (2008),

IFR Dependent Variables

Different researchers had used different indexes to

Almilia (2009), and Khan and Ismail (2011) because they

measure IFR. For example, Kleton& Yang (2008) used

used similar checklists that contain the most famous two

the content and the format in order to measure IFR. In

elements which are content and presentation. The

addition, Khan & Ismail (2011) had used the

researchers compared the researchers’ checklists and

presentation and the content for IFR index. On the other

added them together in order to have a wider list that

side, Almilia (2009) had developed an index in order to

covers approximately all the related items in regards to

measure the technology used in the IFR rather than the

content and presentation elements.

content of information statements. So they assigned the

c.

Control Variables:

following weights in order to measure IFR: content

Based on a number of studies that studied the factors

(40%), user support (20%), technology (20%) and

that affect the use of the IFR, the researchers decided to

timeliness (20%).

use the firm size, leverage, sector type and auditor type

The researchers had adopted an internet financial

as control variables for the current study. It appears that

reporting index (IFRI) for the current study using previous

different researchers such as (Joshi & Al-Bastaki 2000,

studies’ indexes. The IFR index included the content and

Almilia 2009, Dâmaso&Lourenço 2011 and Basuony&

the presentation dimensions because they are the most

Mohamed 2014) had agreed that the firm size is one of

famous and widely used by many researchers, such as,

the most key factors that would affect whether the

Kleton and Yang (2008), Almilia (2009), Khan and Ismail

company is likely using the internet for disseminating

(2011), and Aly, .et al (2010) in order to measure the

their financial information or not. In addition, different

quality of the companies’ websites. In addition, the

studies have determined the factors that affect the IFR.

presentation format can help in preparing a more reliable

For instance, Almilia (2009) used firm size, profitability

disclosure to the interested parties through easy access,

and leverage in order to determine the factors that affect

readability and comprehensible financial information that

the use of IFR.

would help in getting the required information quickly

On the other hand, Basuony& Mohamed (2014) had

supported by displays of user friendly website (FASB,

added more factors that would affect IFR in their study

2000). Moreover, as noted by Khan and Ismail (2010), the

which are firm size, return on assets, leverage, industry

index of IFR should contain the content and the

type and auditor type. Moreover, Kelton& Yang (2008)

presentation dimensions. The content dimension displays

had also added the auditor type as a control variable in

- 247 -



their study in order to measure the impact of corporate

H02: There is no relationship between board size

governance on IFR. Furthermore, Miniaoui (2013) noted

and internet financial reporting (IFR) of companies that

that larger companies with higher leverage are more

are listed in Bahrain Bourse.

probably to have a website and use it for IFR than

H03: There is no relationship between board

smaller low leveraged companies. She also added that it

independence and internet financial reporting (IFR) of

was observed that 62% of IFR firms are from investment

companies that are listed in Bahrain Bourse.

and finance sector, banking sector and insurance sector.

H04: There is no relationship between the directors’

Firm size was measured by the natural logarithm of the

ownership and internet financial reporting (IFR) of

firm’s total assets. In addition, leverage was measured by

companies that are listed in Bahrain Bourse.1

dividing the total liabilities over the total assets.

H05: There is no relationship between the ownership

Furthermore, the researchers measured the sector type by

of top 3 shareholders and internet financial reporting

dividing the listed companies into three categories:

(IFR) of companies that are listed in Bahrain Bourse. 2

Financial sector (1), services sector (2) and industrial sector


(3). Additionally, Xiao et al. (2004) study revealed that the

of top and internet financial reporting (IFR) of

extent of internet corporate disclosure is higher when the

companies that are listed in Bahrain Bourse. 3

Chinese companies that are audited by Big-5 firms

Sample Selection

(Currently Big 4). Therefore, the researchers had measured

The empirical study of the current research depends

BIG4 variable using a dichotomous variable that equals one

on a sample which contains 48 listed companies in

if auditor is a one of the Big-4 firms, and zero otherwise.

Bahrain bourse for the year 2014. However, the required

Auditor type was measured by using a variable that equals

data were gathered from 38 listed companies. Some of

one if the auditor is from the big4 and zero otherwise. All

the companies were excluded from the study because

these information are gathered from Bahrain bourse website

their website was not working and some of them did not

and the listed companies’ websites. The researchers used

have an investor relations section on their websites. In

the most updated information that is prepared in December

addition, few companies were suspended from trading in

31, 2014.

the bourse - table (1) shows the sample selection –

d.

Hypothesis

Moreover, the researchers used the companies’ websites

Extant literature, as reviewed earlier provides a

and Bahrain Bourse website to gather the data required

foundation for the research hypotheses relating to IFR. It

for this study.

is proposed to set up research hypotheses and subhypothesis as follows: H0: There is no relationship between corporate governance and internet financial reporting (IFR) of companies that are listed in Bahrain Bourse. Sub-hypotheses

1

According to the Institutional Shareholder Services (ISS), the directors’ ownership should be between 1% and 20%. 2 According to the Institutional Shareholder Services (ISS), the ownership of top 3 stockholders should not be more than 50%. 3 According to the Institutional Shareholder Services (ISS), the ownership of top stockholder should not be more than 20%.

H01: There is no relationship between CEO Duality and internet financial reporting (IFR) of companies that are listed in Bahrain Bourse.

- 248 -


Table 1.Sample Selection Item

Number

Percentage

Listed companies in Bahrain Bourse

48

100%

Suspended from Bahrain Bourse

(5)

(10.4%)

Company's website was not working

(1)

(2.1%)

The company has no website

(1)

(2.1%)

No investors relations section in the company's' website

(1)

(2.1%)

Closed companies

(2)

(4.3%)

Total companies included in the sample

38

79%

The researchers had divided the listed companies into

Yang, 2008, Mousa & Desoky, 2012, Dharmadasa, et al,

three categories: Financial sector, services sector, and

2014 and Tai, 2015, Hamdan et al. , 2013). The ownership

industrial sector - table (2) shows the sample selection -

level will be measured based on the boards’ ownership, the

Furthermore, the study focused on two aspects which are

ownership of the top 3 stockholders, in addition to the

boards of directors’ characteristics and also the ownership

highest stockholder ownership in the company (Hamdan et

level. The boards' characteristics will be measured based on

al. , 2013).

CEO duality, board size and board independence (Kelton & Table 2.Distribution of Sample Among Sectors Sector

Financial

Services Industrial

Category

Companies per category

Banks

8

Investment

10

Insurance

5

Services

8

Hotels &Tourism

4

Industrial

3

Total Model Development The selection of variables is based on examination of

38

IFRIi   0  1DB _ DUALi   2 BD _ SIZEi  3 BD _ INDPi   4 BD _ ONTi  5 BD _ TTSONFi   6 BD _ TSONTi   7 L _ FSZi  8 ROAi  9 LVGi n3    k SECTi,k  11BIG4i   i k 1 Where:

previous empirical studies. Moreover, multiple regression analysis is used to measure the relationship between corporate governance as an independent variable and Internet financial reporting which is the dependent variable as it is showed in the following equation:

- 249 -


Code


Variable Name

Operationalization

Dependent variable - Internet financial reporting index: IFRI

This is a binary variable wherein 0 indicates that the company not

Internet financial reporting index

use IFR and l otherwise

Independent Variables - Board Characteristics: This is a binary variable wherein 1 indicates that the chairperson DB_DUAL

CEO duality

BD_SIZE

Board size (7-13)

BD_INDP

Board independence

BD_ONT BD_TTSONF BD_TSONT

and CEO are different people and 0 otherwise A binary variable wherein 0 indicates that the size of the board less than 7 and l otherwise A binary variable wherein 0 indicates that there is no non-executive directors in the board and l otherwise.

Directors ownership is between

A binary variable wherein 0 indicates that directors did not owned

1% and 20%

between 1% - 20% and 1 otherwise.

The

ownership

of

top

3

A binary variable wherein 0 indicates that the top three stockholders

stockholders not more than 50%

owned more than 50% and l otherwise.

The ownership of top stockholder

A binary variable wherein 0 indicates that the top stockholder

not more than 20%

owned more than 20% and l otherwise.

Control Variables: L_FSZ

Firm size

Natural logarithm of Total Assets

ROA

Return on assets

Net income/Total Assets

LVG

Leverage

Total liabilities/ Total Assets

Financial sector Sector

Services sector Industrial sector:

BIG4

Auditor Type

εi

Error

This is a binary Wherein 1 means that the company is Commercial Banks; Investment and Insurance and 0 otherwise This is a binary Wherein 1 means that the company is Services, Hotels & Tourism and 0 otherwise This is a binary Wherein 1 means that the company is Industrial and 0 otherwise This is a binary if (Big 4) =1 , Otherwise=0

Validity of data

Some of the companies were excluded from the study

The empirical study of the current research depends

because of different reasons as mentioned in the

on a sample which contains 48 listed companies in

previous sections. Data on corporate governance and

Bahrain Bourse for the year 2014. Nevertheless, the

IFR variables were collected from the companies’

required data were gathered from 38 listed companies.

websites and also from Bahrain Bourse website. The

- 250 -


sample size of the study is quite limited and this is due to

Table 3. Normal Distribution Test: Jarque-Bera Test

the fact that the size of the Bahrain market is small

Variable

J-B

P-V

Skewness

Kurtosis

which contains only 48 companies. Therefore, the

ROA

10.268

0.005

1.168

4.010

researchers have to examine the validity of the data for

Firm Size

2.34

0.308

0.454

2.189

the statistical analysis in order to make sure that the

Leverage

2.83

0.241

0.211

1.729

model of this study is accurate. Four tests were applied in order to test the validity of the data. The tests were the

The second test was Multicollinearity test that tests

normal distribution test, Multicollinearity test, the

the strength of the general linear model that mainly

autocorrelation test, and the Hetroskedasticity test. The

depends on the hypothesis which states that all variables

validity test had shown that the study model that is

are independent from each other. However, if this

representing

condition was not realized, then the general linear model

the

correlation

between

corporate

governance and IFR is accurate and secured.

would be inapplicable. Variance inflation factor (VIF)

The IFR index, CEO duality, board size, board

was determined in order to make sure that the

independence, sector type, and auditor type variables are

independent variables are independent from each other.

dummy variables. Therefore, the normal distribution test

When getting a VIF that is greater than 10, it means that

was not applied to them. Furthermore, firm size, ROA

there is a Multicollinearity problem for the independent

and financial leverage variables were used in the normal

variable (Gujarati, 2003). According to table (4), it can

distribution test.

be noticed that (VIF) value for all independent variables

JarqueBera test was used in order to secure the

are less than 10 which indicates that there is no

approximation of data to normal distribution. According

Collinearity problem in the model of the study.

to Gujarati (2003), the researchers should accept the null hypothesis which refers to that the data follow normal

Table 4.Collinearity Statistics Test

distribution if the probability of (J-B) test was greater than 0.05. Thus, according to table (3), the researchers had noticed that the probability for firm size and financial leverage were greater than 0.05. In addition,

Model

the results of the test had shown that the Skewness was approximately zero and the Kurtosis was approximately

Tolerance

VIF

CEO duality

.909

1.100

Board size (7 to 13)

.484

2.066

Board independence

.650

1.538

Directors ownership is between

.270

3.701

.366

2.731

.181

5.532

Firm size

.316

3.164

ROA

.373

2.679

Leverage

.346

2.891

Big4

.398

2.510

1% and 20%

three. Therefore, this implies that they are normally

the ownership of top 3

distributed. However, ROA (J-B) probability was less

stockholders not more than 50%

than 0.05 and also the Skewness was not close to zero

the ownership of top stockholder

and the Kurtosis was not close to three. Thus, this

not more than 20%

indicates that it was far away from the normal distribution. As a result, the natural logarithm for this variable was used in order to overcome this problem.

- 251 -



Tolerance

VIF

Homoskedasticity or Heteroskedasticity. According to

Ser

.343

2.915

Awad (2000) the Mean must be equal to zero. When the

Ind

.554

1.804

Heteroskedasticity is present in the model, statistical

Fin

.514

1.947

methods will be used in order to solve this problem.

Model

Such as, using White test and using E-Views program In addition, the researchers had examined the study

after being elicited from the program themselves.

model using autocorrelation test in order to check

According to table (6), the researchers had found that p-

whether there is an autocorrelation problem. This

value of the model is less than 0.05 which means

problem occurs when the two neighboring scenes were

rejecting the null hypothesis. This means that the model

correlated and therefore, it would influence the

is having a Homoskedasticity.

credibility of the model used. Due to this correlation, Table 6.Homoskedasticity Test

the influence of the independent variables would be great. In order to check it, the researchers had used

Model

F (White)

P-Value (White)

Durbin Watson test. According to table (5), the (D-W)

1

3.034

0.0098

value of the model was beyond the d-statistic range which is less than the minimal range. This shows that

Descriptive Analysis

there is a positive autocorrelation. In order to overcome

The descriptive analysis is divided into two sections.

this problem, (Lag 1) has to be considered when testing

The first section describes generally the descriptive

the model of the study.

analysis of the variables. The second section examines the variables based on firms’ size, score of corporate governance and industry sectors using the path analysis.

Table 5.Autocorrelation Test

a.

Std. Model

R

R

Adjusted

Error of

Durbin-

The researchers had divided the variables into two

Square

R Square

the

Watson

categories, continuous variables and dummy variables. Table (7) represents the descriptive statistics for

Estimate 1

.914

General Descriptive Analysis

.835

.752

.08669

continuous variables. The mean of the total assets of the

1.900

sample size is 1465963, which shows that the mean size a.

Predictors: (Constant), Ind, ROA, Directors

of the study sample is large. This gives us an indicator

ownership is between 1% and 20%, CEO duality ,

that most of the companies are using IFR as revealed by

Board independence, Board size (7 to 13),

previous studies who mentioned that large companies

Leverage, the ownership of top 3 stockholders not

are more probable to disclose their annual reports on the

more than 50%, Big4, Firm size, Ser, fin, the

company’s Web sites (Ismail &Tayib, 2000). Furthermore, the mean of ROA hold on average .043,

ownership of top stockholder not more than 20% b.

with a range between -.035and .195. This shows that

Dependent Variable: Index

Finally, the researchers had used Homoskedasticity

companies are disclosing their information even if they

test in order to check whether the model is having a

are having a loss. In addition, the leverage of the sample

- 252 -


varies from .041 to .896 which indicates that there are

IFR index has an average of .712, with a range

many companies who have high leverage and most of

between .24 and .92. The mean indicates that listed

these companies are in the financial sector in Bahrain

companies are using an adequate level of internet

because they depend mostly on loans in financing their

financial reporting. This means that Bahrain is adopting

business. Also, this gives us an indicator that IFR level

new trends and technologies in order to allow substitute

would increase in order to provide all the obligators and

presentation formats for financial information that would

stakeholders with the current status of the company’s’

enhance the transparency of the disclosure and hence,

performance.

attract more investors internationally. Table 7.Descriptive Statistics for continuous variables Variable

N

Mini.

Max.

Mean

S.D

Total Assets

38

5949

12309764

1465963

3002932

ROA

38

-.035

.195

.043

.051

Leverage

38

.041

.896

.434

.281

IFR Index

38

.24

.92

.712

.172

Valid N (listwise)

38 independence would lead to enhanced transparency and

Moreover, Table (8) reports descriptive statistics for dummy variables. It shows that 92.1% of the sample was

responsibility

separating the CEO from the chairman of the board. This

disclosure. He further added that this implies a stronger

indicates that listed companies are concerned in

and

separating the CEO from the chairman of the board.

independent board members.

higher

by

means

controlling

of and

additional monitoring

voluntary role

of

Therefore, result is consistent with Bahrain code which

Moreover, 89.5% of the firms’ board size is between

recommends that the chairman of the board should be

7 and 13. Harris and Raviv (2008) found that larger

not the same person as the CEO and independent, so

board could be optimal size for the board. Moreover,

that promote an appropriate balance of power and a

Zaheer (2013) mentioned that larger board size has a

greater capacity of the board for more independent

positive relationship with the level of corporate

decision making.

governance disclosure. Therefore, the result shows that 89% the boards are between the optimal range and IFR

In addition, 94.7% of the firms are having

level would probably be high.

independent members in the board. This is a good indicator that companies are making sure in increasing

In addition, 57% of the directors’ ownership is

the boards’ independence and accordingly, increasing

between 1% and 20%. 55.3% of the top 3 stockholders’

the corporate governance in order to attract more

ownership was more than 50%. Additionally, 60.5% of

investors and to avoid any conflict of interests while

the firms’ stockholders’ ownership was more than 20%.

taking decisions. This is supported by Hussain (2009)

All these results show that the directors and major

study who mentioned that higher level of board

stockholders ownership are more than the average.

- 253 -



Finally, 81.6% of the firms are audited by Big4. The

are considered as small firms. Then, the researchers had

percentage reveals that most of the samples' companies

found the mean of the CEO duality and the other

are hiring big4 and this would probably indicate that the

variables for all the firms and compare them based on

level of the disclosures' transparency is high. Based on

their size. The results are showed in table (9).

Xiao et al.,(2004) which mentioned that there is a

Based on table (9), it was noticed that small firms are

positive association between audit firm size and

separating the CEO from the chairman of the board more

voluntary disclosure. In addition, the percentage would

than large firms. Small firms’ mean was (1.00), while

also indicates that the level of corporate governance in

the large firms’ mean was (.84), which is less than the

Bahrain Bourse listed companies might be high based on

small firms. The result was statistically significant at

Fan and Wong (2004) study which suggests that external

10% of confidence because the sig. was (.074) and the t.

auditors play a governance role. They justify their results

test value was (1.837) was greater than its critical value

by stating that firms tend to hire name-brand external

at 10% of confidence. Moreover, the board size of large firms was between

auditors when their ownership structures indicate agency conflicts.

7 and 13 members whereas small firms had it less than

b.

large firms. The mean for the large firms is (1.00),

Path analysis

b.1. Firms’ Size

whereas the mean for small firms is (.79). The result was

The study sample was divided into two categories

statistically significant at 5% of confidence because the

based on the firms’ size; large and small firms. Firms

sig. was (.035). Also, the t. test value (2.191) was greater

that have greater size than the median are considered

than its critical value at 5% of confidence.

large firms, and firms that have size less than the median Table 8.Descriptive Statistics for dummy variables Variables

Frequency of 1’s

Label

Frequency of 0’s

Frequency

Percent

Frequency

Percent

DB_DUAL

35

92.1

3

7.9


BD_SIZE

34

89.5

4

10.5

Board independence

BD_INDP

36

94.7

2

5.3

Directors ownership is between 1% and 20%

BD_ONT

22

57.9

16

42.1

the ownership of top 3 stockholders not more than 50%

BD_TTSONF

16

42.1

21

55.3

the ownership of top stockholder not more than 20%

BD_TSONT

14

36.8

23

60.5

BIG4

31

81.6

7

18.4

CEO duality

Big4 Furthermore,

large

firms

are

having

more

of confidence because the sig. was (.154).

independent board members than the small firms. Large

Directors’ ownership not more than 20% in large

firms’ mean is (1.00), whereas small firms’ mean is

firms was greater than the small firms. The large firms’

(.89). The result was not statistically significant at 10%

mean was (.63), whereas small firms’ mean was (.53).

- 254 -


The result was not statistically significant at 10% of

greater than its critical value at 1% of confidence. This

confidence because the sig. level was (.524).

result is supported by Basuony& Mohamed (2014) study

Small firms had a greater percentage than the large

which mentioned that that large size firms tend to

firms in the ownership of the top 3 stockholders is not

disclose more information causing a reduction in

more than 50%. The mean for the small firms was (.58),

information asymmetry and agency costs.

whereas large firms’ mean was (.28). The result was

ROA for small firms was (.067), which was greater


than the mean of the large firms which was (.019). The

sig. was (.068). Also, the t. test value (1.887) was greater

result was statistically significant at 1% of confidence

than its critical value at 10% of confidence.

because the sig. was (.003) and the t. test value (3.205)

In addition, the ownership of the top stockholder is

was greater than its critical value at 1% of confidence.

not more than 20% in small firms was greater than large

The result is supported by Becker et al. (2010) study

firms. The mean for small firms was (.47), and large

which revealed that there is negative and statistically

firms’ mean was (.28). The results were not statistically

significant relation between the total assets of the firm

significant at 10% of confidence because the sig. was

and their profitability. Moreover, the leverage for large firm (.556) was

(.231). Regarding the corporate governance index, small

greater than the leverage for small firms (.313). The

firms had a greater mean value than large firms. The

result was statistically significant at 1% of confidence

small firms’ mean was (.7105), whereas the large firms’

because the sig. was (.006). Also the t. test value (2.918)

mean was (.6754). The result was not statistically

was greater than its critical value at 1% of confidence. Finally, large firms are audited by big 4 more than

significant at 10% of confidence because the sig. was

small firms. The mean for the large firms was (1.00),

(.438). On the other hand, the IFR index in large firms was

whereas (.63) for the small firms. The result was

greater than small firms. Small firms mean was (.6194),


whereas large firms’ mean was (.8056). The result was

sig. was (.003). In addition, the t. test value (3.240) was


greater than its critical value at 1% of confidence.

sig. was (0). In addition, the t. test value (3.932) was Table 9.Distribution of variables based on the firms’ size Firms size Variables

Independent sample T. test

Obs. Large firms

Small firms

T. test

Sig.

CEO duality

19

.84

1.00

-1.837***

.074


19

1.00

.79

2.191**

.035

Board independence

19

1.00

.89

1.455

.154

Directors ownership is between 1% and 20%

19

.63

.53

.643

.524

the ownership of top 3 stockholders not more than

19

.28

.58

-1.887***

.068

50%

- 255 -



Firms size Variables


Obs. Large firms

Small firms

T. test

Sig.

the ownership of top stockholder not more than 20%

19

.28

.47

-1.220

.231

Corporate Governance Index (IND_CG)

19

.675

.710

-.784

.438

IFR Index

19

.805

.619

3.932*

.000

ROA

19

.019

.067

-3.205*

.003

Leverage

19

.556

.313

2.918*

.006

Big4

19

1.00

.63

3.2403*

.00

Statistically confident at: 10%***, 5%**, 1%* C. T. test: 10% = 1.303, 5% = 1.684, 1% = 2.423

at 10% of confidence because the sig. was (.283).

b.2.Firms’ Score of Corporate Governance (CG) Furthermore, the study sample was also divided into

In addition, the ROA for firms with high score of CG

two categories based on the firms’ score of corporate

was greater than firms with low CG score. The mean of

governance: Firms with high score of corporate

firms with high score of corporate governance was

governance and firms with low score of corporate

(.047), while the mean of firms with low score of

governance. Firms that have a greater score of corporate

corporate governance was (.030). The result is supported

governance than the median are considered firms with

by Al- Haddad et al. (2011) study which reveals that that

high score of corporate governance, and firms that have

there is a positive relationship between profitability

corporate governance score less than the median are

measured

considered as firms with low score of corporate

Velnampy and Pratheepkanth (2013) mentioned that

governance. Then, the researchers had found the mean of

there is a possible impact of corporate governance on

the total assets and the other variables for all the firms and

ROE and ROA. However, the current study result was

compared them based on the firms’ score of corporate

not statistically significant at 10% of confidence because

governance. The results are showed in table (10).

the sig. was (.392).

by

(ROA)

and

corporate

governance.

Based on table (10), the result had shown that firms

The leverage of firms with low score of CG was

with high score of corporate governance have a greater

greater than firms with high CG score. The mean of

mean of total assets than firms with low score of

firms with low score of corporate governance was

corporate governance. The mean of firms with high

(.461), while the mean of firms with high score of

score of corporate governance was (1760835.14), while

corporate governance was (.426). This result is

the mean of firms with low score of corporate

consistent with Rijal et al.(2010) study which revealed

governance was (515823.44). This would be also

that corporate governance leads to lower financial

supported by Ashbaugh et al., (1999) who stated that

leverage and disputes in the agencies. However, the

economies of scale suggest that larger firms are more

result was not statistically significant at 10% of

likely to post financial reports at websites than smaller

confidence because the sig. was (.752). Moreover, firms with high score of corporate

ones. However, the result was not statistically significant

- 256 -


governance are audited by big 4 more than firms with

governance are using IFR more than firms with low

low score of corporate governance. The mean for the

score of corporate governance. The mean of firms with

firms with high score of corporate governance was (.86),

high score of corporate governance was (.747), whereas

whereas (.67) for the firms with low score of corporate

the mean firms with low score of corporate governance

governance. This result is supported by prior studies

was (.598). The result was statistically significant at 5%

who mentioned that there is a positive association

of confidence because the sig. was (.021). In addition,

between audit firm size and voluntary disclosure

the t. test value (2.420) was greater than its critical value

(Kelton& Yang, 2008). Nevertheless, the result was not

at 5% of confidence. The result probably shows that


corporate governance mechanisms would have an impact

sig. was (.196).

on firm’s IFR behavior ( Kelton& Yang, 2008).

Finally,

firms

with high score

of corporate

Table 10.Distribution of variables based on the score of the firms’ corporate governance The score of CG in firms Variables


Obs. High CG

Low CG

T. test

Sig.

Total Assets

29 - 9

1760835.14

515823.44

1.089

.283

ROA

29 - 9

.047

.030

.866

.392

Leverage

29 - 9

.426

.461

-.319

.752

Big4

29 - 9

.86

.67

1.316

.196

IFR Index

29 - 9

.747

.598

2.420**

.021

Statistically confident at: 10%***, 5%**, 1%* C. T. test: 10% = 1.303, 5% = 1.684, 1% = 2.423

Furthermore, ROA mean was the largest in the

b.3. Industry Sectors Moreover, the study sample was analyzed based on

services sectors .088. This is due to the fact that services

the sectors. The researchers had divided them into three

sector employs less assets comparing to other sectors

sectors: financial sector, services sector and industrial

which would contribute in increasing the ROA. Also, the

sector. The industrial sector includes only 3 companies.

number of companies in the services sector is less than

Therefore, the sector size does not represent an accurate

the financial sector so this would affect the ROA

results comparing to the other sectors. One way ANOVA

calculation.

is the technique used in order to compare the means of the

In addition, the table revealed that the leverage of the

three sectors using F distribution. According to table (11),

financial sector was the highest between the sectors .593.

the mean of the total assets of the financial sector was

The financial sector includes banks and insurance

greater than the mean of the services and industrial

companies and they usually have higher leverage than

sectors. One of the reasons is that the financial sector is

the other sectors because their business mainly depends

the largest sector in Bahrain Bourse.

on debts.

- 257 -



IFR index was the highest in the financial sector and

debtors in order to increase transparency.

this possibly illustrates that financial institutions tend to

However, corporate governance was generally high

disclose more information in order to attract investors. In

among all sectors. However, the highest corporate

addition, financial sector depends on debts more than the

governance level was in the services sectors .736.

other sectors. Therefore, the financial institutions are

Perhaps companies in the services sector are more

more likely to disclose more detailed information to

aligned with the corporate governance code.

Table no. 11.Descriptive analysis – Sectors comparison Variables Sectors

Financial

Services

Industrial

Mean

S.D

Mean

S.D

Mean

S.D

2294863

3641046

142300

285578

405721

669065

ROA

.019

.030

.088

.058

.042

.030

Leverage

.593

.232

.195

.147

.170

.115

IFR Index

.750

.162

.640

.177

.704

.186

CG Index

.666

.142

.736

.132

.722

.096

Total Assets

Observations

23

12

3

Moreover, according to table (12), variables of

100%, the services 91.7% and the financial sector 87%.

corporate governance were compared based on the

The results were not statistically significant because the

sector type. One way ANOVA technique was also used

sig. was (.768). Board independence was also the highest

in order to compare the means of the variables among

in the industrial and services sectors. The industrial and

the sectors.

services sectors were 100%, however, the financial sector was 91.3%. The results were not statistically

Table (12) reported that the mean of all sectors are

significant because the sig. was (.524).

reasonably high which reveals that all the sectors are generally applying the proper mechanisms that are

Furthermore, the results showed that 66.7% of the

related to the board characteristics. The industrial sector

industrial sector directors’ ownership was not more than

got the highest percentage in separating between the

20%, followed by the financial sector 60.9% and the

CEO and the chairman of the board. The percentage of

services sector 50%. The results were not statistically

the industry sector was 100 %, followed by the services


sector 91.3% and the financial sector 91.3%. The results

Moreover, the ownership of top 3 stockholders not

were not statistically significant because the sig. was

more than 50% variable was the highest in the services

(.878). The sample of the industrial sector is small (3

sector. The services sector was 58.3%, financial sector

companies), therefore, the result does not represent the

was 34.8 and finally the industrial sector 33.3%. The

full sector. In addition, the industrial and services sectors

results were not statistically significant because the sig.

had higher percentage than the financial sector with

was (.282). The ownership of top stockholder not more than 20%

regards to the board size. The industrial sector had

- 258 -


variable was the highest in the services sector 41.7%,

significant because the sig. was (.039). This means that

followed by the financial sector 34.8% and finally the

financial sector tend to hire big4 external auditors most

industrial sector 33.3%. The results were not statistically

likely because when the external auditor is from the


big4, then corporate governance would be enhanced

Finally, the financial sector was 91.3% audited by

because the external auditor would contribute in

the big4, followed by the services sector 75% and the

monitoring and disclosing transparent information to the

industrial sector 33.3%. The results were statistically

public (Xiao et al., 2004).

Table no. 12.One way ANOVA –Comparison of variables among the sectors Sectors Financial

Variables

Services

Industrial

F

Sig.

0

.130

.878

100

0

.266

.768

0

100

0

.658

.524

50

50

66.7

33.3

.226

.799

65.2

58.3

33.3

33.3

66.7

1.314

.282

34.8

65.2

41.7

50

33.3

66.7

.180

.836

91.3

8.7

75

25

33.3

66.7

3.571

.039

Freq.

Freq.

Freq.

Freq.

Freq.

Freq.

(1)

(0)

(1)

(0)

(1)

(0)

91.3

8.7

91.7

8.3

100


87

13

91.7

8.3

Board independence

91.3

8.7

100

Directors ownership is between 1% and

60.9

39.1

34.8

CEO duality

20% the ownership of top 3 stockholders not more than 50% the ownership of top

stockholder

not

more than 20% Big4 Testing the Research Hypothesis

objectively monitor the managements' behavior (Bushee

This section explains the results of the research

et al. 2014). Other researchers mentioned that when the

hypotheses based on the multi regression analysis as

CEO and the chairman is the same person, this would

follows:

cause conflict of interests and it reduces the boards’

H01: There is no relationship between CEO Duality

power to accomplish its governance tasks (Dayton,


1984; levy, 1981). Also, Rechner and Dalton (1991)


mentioned that companies who are having independent

Table (13) shows that there is a negative association

leadership (separation of CEO and chairman of the

between CEO duality and IFR. The explanation can be

board) are consistently outperformed companies relying

that the combination of the CEO and the chairperson

upon CEO duality.

positions is considered as ineffective governance

Accordingly, based on agency theory, shareholders

because it reduces the probability that the board will

would demand for more information disclosed when

- 259 -



CEO and chairman is the same person and by that the

voluntary disclosure is positively associated with the

IFR level would increase and vice versa. However, the

percentage of outside directors on the board. In addition

result was not statistically significant because the sig.

to the study by Gray and Chau (2011) which also

was (.4107), therefore, the result is not supported. This

revealed that independent non-executive board members

result is consistent with Thangatorai et al. (2011) and

are positively associated with voluntary disclosure of the

Kelton& Yang (2008) studies who mentioned that there

firms. In addition, Ezat and El-Masry (2008) study had

is no association between IFR and CEO duality.

proved that larger board size could increase the

Furthermore, Yap et al. (2011) study revealed that the

timeliness of IFR. However, the result of the current

separation of the CEO and the chairman of the board do

study was not statistically significant. Consequently, the

not explain IFR and one of the reasons is that the

researchers accepted the hypothesis.

implementation of corporate governance standards is

H04: There is no relationship between the directors’

weak. Based on the above discussion, the researchers

ownership and internet financial reporting (IFR) of

accepted the hypothesis.


H02: There is no relationship between board size

The results revealed that when companies are


binding to the variable which stated that director’s


ownership should be between 1 % and 20% and also to

Table (13) shows that there is a significantly positive

the other variable which stated that the ownershipof top

relationship between the board size and IFR. The result

stockholders should not be more than 20% are having

is supported by Yap et al. (2011) study who revealed

less IFR.

that large board size would lead to a broader information

These results are consistent with Eng and Mak

range because the board members are sharing their

(2003) who mentioned that when there is a greater

experience

other.

percentage of managerial ownership, the need for more

Therefore, the voluntary disclosures would increase

disclosure is decreased. And accordingly IFR would

through the companies’ Web pages. The result of the

decrease as well. Other researchers mentioned that

current study was statistically significant. According to

managerial ownership would help in overcoming the

the above discussion, the researchers did not accept the

problem of managerial myopia and it also helps in

hypothesis.

matching the interests of managers and shareholders. By

and

knowledge

between

each

H03: There is no relationship between board

that, the demand for monitoring would decrease (Francis

independence and internet financial reporting (IFR) of

& Smith, 1995, Kelton& Yang, 2008). Additionally, this


would probably be because when the directors own

The results reports that board independence is

small portion of the ownership of the company's' shares,

influencing IFR positively. The researchers point of

they do not pay much attention to disclosing more

view is that independent members encourage disclosing

information

more information to the stakeholders, and IFR is a one

Nevertheless, the study result was not statistically

way of disclosing and disseminating information. The

significant because the sig. was (.850). Subsequently,

current result is consistent with Kelton and Yang (2008)

the researchers did not accept the hypothesis.

and Ajinkya et al. (2005) studies results who stated that

and

hence,

IFR

would

decrease.


- 260 -


of top 3 shareholders and internet financial reporting

interested than small firms to use the information

(IFR) of companies that are listed in Bahrain Bourse.

technology to enhance financial reporting to meet the greater demand for information required.

The result reveals that when the ownership of the top stockholder is in the proper level (not more than 20%)

Also table (13) reports that there is a positive

based on Institutional Shareholder Services Inc. (ISS)

relationship between ROA and IFR. However the result

recommendation, the level of IFR would decrease. a

was not statistically significant. The result is also

possible explanation is that when ownership of the top

supported by Islam et al. (2014) who mentioned that

stockholder is high, his influence and the monitoring of

profitability is not significant in explaining the level of

the firms’ activities would increase and by that the level

voluntary disclosure of financial information.

of disclosure would decrease. Also, another explanation

Moreover, the table reported that there is a positive

could be that top stockholder depends on Big4 in

relationship between leverage of firms and the level of

disseminating

company.

disclosing information using the internet. The finding is

Therefore, the relationship between the top stockholder

consistent with Debreceny et al. (2002) who stated that

and the IFR level would be negative. Nevertheless, the

management would disclose voluntarily information via

study result was not statistically significant because the

the internet in order to allow the creditors to monitor

sig. was (0.681). Hence, the researchers accepted the

continuously the issues related to the company and help

hypothesis.

them to evaluate the ability of the company to pay back

the

information

of

the

its financial obligations on time. However, the study


result was not statistically significant.

of top and internet financial reporting (IFR) of

Additionally, the table reports that there is a positive

companies that are listed in Bahrain Bourse. According to the table (13), there is a positive

relationship between IFR and sector type. This shows

relationship when the top 3 stockholders ownership does

that IFR varies according to the sector type. However,

not exceed 50% in the company and the level IFR. The

the study result was not statistically significant. Finally,

reason is that when the stockholders are holding less

the table illustrated that there is a positive relationship

than 50% of the shares, it means that there are no major

between the firms who are audited by Big4 and the level

shareholders in the company who will take care of

of the internet financial reporting. This result is

monitoring and influencing the company’s performance

consistent with previous studies which indicate that there

in order to reduce the agency problem. Therefore, the

is a positive association between audit firm size and

stockholders

voluntary disclosure (Xiao et al., 2004; Kelton& Yang,

will

demand

for

disclosing

more

2008) studies.

information in order to monitor the performance of the company and by that increasing the IFR. However, the

The explanation of this result is that the aim of

study result was not statistically significance. Thus, the

corporate governance is to resolve problems that arise

researchers accept the hypothesis.

from the principal-agent relationship, one measure

Additionally, the study reveals that there is a positive

which could contribute in helping corporate governance

relationship between internet financial reporting and the

in reducing the agency problem is the external auditors'

firms’ size. The result is consistent with Xiao et al.

involvement. Furthermore, the audit serves as a

(1996) who mentioned that large firms are more

signaling mechanism to the shareholders of a company

- 261 -



that information disclosed by the company’s directors

researchers had investigated the relationship between

can be reliable. (Ojo,2009). Moreover, according to

corporate governance and internet financial reporting in

Beattie (2001), financial audit is considered a vital part

Bahrain Bourse listed companies.

of corporate governance that makes management accountable to the stockholders for its stewardship of the

Table 13.Multi Regression Results

company .Therefore, the external auditor’s role and the

Beta

T. test

Sig.

CEO duality

-0.062

-0.836

0.4107

governance are fundamental complements in facilitating


0.173

2.343

0.0274

the achievement of the targeted aims of corporate

Board independence

0.077

0.927

0.362

governance. (Ojo,2009).

Directors ownership is

-0.054

-0.862

0.396

0.010

0.190

0.850

-0.032

-0.415

0.681

audit

committee’s

responsibilities

in

Variables

corporate

The study result was

statistically significant.

between 1% and 20%

After the above discussion for the sub-hypotheses

the ownership of top 3

and the control variables of the model, the results reveal

stockholders not more

that only the board size from the independent variables

than 50%

and the big4 from the control variables are affecting IFR.

the ownership of top

However, the study model tests the relationship between

stockholder not more than

independent variables (CG) and the dependent variable

20%

(IFR). Therefore, the researchers accepted the null

Firm size

0.011

0.361

0.720

hypothesis as there is no relationship between corporate

ROA

0.137

0.295

0.770

Leverage

0.144

1.576

0.127

Sector type

0.032

1.193

0.243

Big 4

0.228

3.693

0.001

governance and IFR. Conclusion and Recommendations: Solid corporate governance mechanisms encourage managers to disclose more information and this is because it can improve the monitoring of managers’ disclosure strategies and reduces the benefits of withholding information (Madhani, 2014). According to Ramadhan (2014), good corporate governance would

governance

7.907

Sig (F)

0.00

information on how to use the latest display in

and comprehensive disclosure of all related information performance,

F

presentation dimensions. The content dimension reveals

companies and make sure to provide accurate, timely, financial

0.776

The study used IFR index that consists of content and

strengthen the internal control procedures of the

including

R²

disseminating the corporate information and website

of

design. Moreover, the presentation dimension reports the

corporation and the ownership. Therefore, internet

usage of the display criteria in distributing the corporate

financial reporting is considered as a disclosure tool that

information and the companies' web design (Khan &

is aimed at lowering the information asymmetry between

Ismail, 2011).

shareholders and managers of any firm (Debreceny et al.

Multi regression analysis was used in order to test the

2002). Thus, IFR would contribute in enhancing

relationship between the variables. Overall, the results

corporate governance of the firms. Accordingly, the

- 262 -


indicate the level of corporate governance and internet

Accordingly, the acceptable level of internet

financial reporting in Bahrain listed companies is

financial reporting of the listed companies is due to Big4

appropriate. But, the relationship between corporate

companies and it is influenced by the boards’

governance and internet financial reporting is weak due

characteristics but in a limited way. Furthermore,

to the fact that the board characteristics do not affect the

disclosing financial reports through the internet is not a

level of disclosing information via the internet (IFR).

mandatory requirement in Bahrain. Also, Bahrain

However, the results revealed that board size have a

corporate governance code is based as comply or explain

positive relationship with IFR. The result is supported by

framework, which illustrates that companies should

Yap et al. (2011) study who revealed that large board

comply with the code or should give a justification in

size would lead to a broader information range because

case of non-compliance. According to Ramadhan

the board members are sharing their experience and

(2014), most developing countries, and Bahrain in

knowledge between each other. Therefore, the voluntary

particular, do not have strong policy on voluntary

disclosures would increase through the companies’ Web

disclosure. Therefore, the code contains standards and

pages.

recommendations but the implementation of the code positive

might still need to be improved. This is due to the fact

relationship with the disclosure through the internet, and

that Bahrain market is small and also considered as part

this is probably because the aim of corporate governance

of the developing countries and this would affect the

is to solve problems that result from the principal-agent

execution

relationship. Consequently, the involvement of the

governance code. The mentioned reasons would also

external auditors' would contribute in helping corporate

contribute in making the results of the current study to

governance

problem.

be differing from Kelton and Yang (2008) findings in

Furthermore, the audit serves as a signaling mechanism

different aspects. Their study was conducted in US

to the shareholders of a company that information

market which is a developed market where corporate

disclosed by the company’s directors can be reliable.

governance mechanisms are applied strictly. Moreover,

(Ojo,2009). Moreover, according to Beattie (2001),

the

financial audit is considered an important part of

(Agboola&Salawu,

corporate

management

2012) studies that reveal that companies audited by firms

accountable to the shareholders for its stewardship of the

affiliated with the Big 4 international auditing firms

company .Therefore, the external auditor’s role and the

were more likely to engage in Internet financial

audit

reporting.

Moreover,

Big4

in

companies

reducing

governance

committee’s

that

the

have

a

agency

makes

responsibilities

in

corporate

and

current

implementation

study

results

2012

and

of

are

the

corporate

supported

by

Nurunnabi&Hossain,

governance are fundamental complements in helping to

Mousa and Desoky (2012) stated that companies

achieve the desired aims of corporate governance. (Ojo,

disclose information in order to eliminate agency costs.

2009). The study result was statistically significant. This

Therefore, this would enhance the confidence of the

study is also consistent with other previous studies

investors in the reported financial information. Similarly,

which indicate that there is a positive association

Basuony and Mohamed (2014) added that firms tend to

between audit firm size and voluntary disclosure (Xiao

disclose more information in order to decrease

et al., 2004; Kelton& Yang, 2008) studies.

information asymmetry. Also, Debreceny et al. (2002)

- 263 -



had mentioned that IFR is one of the tools that

a company. In addition, Kelton and Yang (2008)

disseminate corporate total disclosure that is aimed to

mentioned corporate governance has an impact on

lower information asymmetry between the managers and

internet financial reporting. Therefore, the researchers

stakeholders. Therefore, the study recommends Ministry

suggests investigating whether the presentation of the

of Industry and Commerce, Central Bank of Bahrain,

information in the companies’ websites as part of

Bahrain bourse and National Corporate Governance

internet financial reporting has an impact on the decision

Committee to encourage the companies to disclose their

making process in Kingdom of Bahrain.

information through the internet in order to increase the

Furthermore, based on the study results, the

transparency and fairness and by that the free rider

researchers suggest having a further study that

problem and agency cost would be eliminated.

investigates

the

relationship

between

corporate

governance and big4 companies. In addition, the Limitations and scope for further studies

researchers noticed that there are many institutional

The study was conducted in Bahrain, thus, the

investors in Bahrain listed companies. As mentioned by

sample size is small. In addition, there are few

prior studies, institutional investors and IFR are affecting

companies that do not have a website. Also, some of the

each other. Bushee&Noe (2000) had mentioned that

companies’ websites were not working and few websites

firms with higher disclosure have greater institutional

did not contain investors' relations section and hence, the

ownership. However, the researchers had noticed that

information was not possibly provided. Therefore, the

there are limited studies about this relationship in

study findings may not be generalizable.

Bahrain. Hence, the researchers suggest having a further

Moreover, a study by Gurbuz et al. (2010) had

study in order to figure out whether there is a

discovered that good corporate governance mechanisms

relationship between IFR and institutional investors in

would lead to improving the decision making process of

Bahrain.

REFERENCES Abhayawansa, S. and Johnson, R. 2007. Corporate Governance

Reforms

in

Developing

Research Journal of Finance and Accounting. 3: (11).

Countries:

Khan, A. M. N. A. B. and Ismail, N. A. 2011.The Use of

Accountability versus Performance, in R Johnson (ed.),

Disclosure Indices in Internet Financial Reporting

Reading in Auditing, John Wiley and Sons Australia. 2

Research, Journal of Global Business and Economics,

(7): 84-98.

3(1): 157-173.

Abdelsalam, O., Street, D. and Bryant, S. 2007. An examination

of

the

determinants

of

Al- Haddad, W. and Alzurqan, S. and Al_Sufy, F. 2011. The

the

Effect of Corporate Governance on the Performance of

comprehensiveness of corporate Internet reporting

Jordanian Industrial Companies: An empirical study on

provided by London Listed companies.Journal of

Amman Stock Exchange. International Journal of

International Accounting Research.6 (2): 1–33.

Humanities and Social Science.1:(4).

Ahunwan, Boniface. 2002. Corporate Governance in Nigeria.

Alhazaimeh, A., Palaniappan, R., and Almsafir, M.

Journal of Business Ethics, 37(3): 269-287.

(2014).The Impact of Corporate Governance and

Agboola, A. and Salawu. 2012. The Determinants of Internet

Ownership Structure on Voluntary Disclosure in Annual

Financial Reporting: Empirical Evidence from Nigeria.

Reports

- 264 -

among

Listed

Jordanian

Companies.


ProcediaSocial and Behavioral Sciences, 129: 341-348.

Accounting.6(1): 70-89.

Al-Matari, Yahya, Abdullah Al-Swidi and Faudziah Fadzil.

Beattie, V., Fearnley S. and Brandt, R.2001. Behind Closed

2012. Corporate Governance and Performance of Saudi

Doors: What Company Audit is Really About (ICAEW).

Arabia Listed Companies, British Journal Publishing,

London: Palgrave. Beasley, M. 1996. An empirical analysis of the relation

Inc. 9 (1): 1-30.

between the board of director composition and financial

Al-Sartawi, Abdalmuttaleb. 2015. The Effect of Corporate Governance on the Performance of the listed Companies

statement fraud.The Accounting Review.71 (4): 443–

in the GulfCooperation Council Countries. Jordan

465. Booker, J. A., Galbreath, S. C. and Rand, R. 1997.Financial

Journal of Business Administration, `11, (3):705-725. Al-Sartawi, Abdalmuttaleb. and Zakeya, Sanad. 2015. The

Information and the WWW Current State of Reporting

Effect of Corporate Governance on Stock performance:

Practices, The National Public Accountant, 42(8): 32-

Evidence from Bahrain. 6th Global Islamic Marketing

35. Botosan, Christine A. 1997. Disclosure Level and the Cost of

Conference.6-8 May. International Islamic Marketing

Equity Capital.The Accounting Review. 72 (3): 323-349.

Association, Istanbul. Al-Shammari, B., and Al-Sultan, W. 2010.Corporate governance

and

Kuwait.International

voluntary Journal

of

disclosure

in

Disclosure

and

Bushee, B. and Noe, C F. 2000. Corporate Discloser Practices, Institutional Investors, and Stock Return Volatility.

Governance, 7(3): 262-280.

Journal

of

Accounting

Research.

Supplement, 38 (3): 171-202. Bushee, B.,Carter, Mary Ellen; Gerakos, Joseph. 2014.

Aly, D., Simon, J and Hussainey, K. 2010. Determinants of corporate internet reporting: evidence from Egypt.

Institutional

Managerial Auditing Journal, 25 (2): 182-202.

Governance Mechanisms. Journal of Management

Almilia, L. 2009.Determining Factors of Internet Financial

Investor

Preferences

for

Corporate

Accounting Research. 26(2): 123-149. 27.

Reporting in Indonesia, Accounting and Taxation, 1(1):

Davis,

87-99.

G.F.

(2005).

New

directions

in

corporate

governance.Annual Review of Sociology, 31,143–162.

Ashbaugh, H., Johnstone,K. and Warfield.T. 1999. Corporate

Dâmaso, G. and and Lourenço, I. C. 2011. Internet Financial

Reporting on the Internet.Accounting Horizons, 13 (3):

Reporting: Environmental Impact Companies and other

241-257.

Determinants.

8th

International

Conference

on

Ajinkya, B., Bhojraj, S., Sengupta, P. 2005. The Association

Enterprise Systems, Accounting and Logistics (8th

between Outside Directors, Institutional Investors and the

ICESAL. 2011. 11-12 July 2011, Thassos Island, Greece.

Properties of Management Earnings Forecasts.Journal of

Dayton, K.N. 1984. Corporate governance: The other side of the coin. Harvard Business Review, 62 (1): 34–37.

Accounting Research. 43: 343-376. Awad, T. 2000. Introduction to Econometrics.Amman:

Debreceny, R., Gray, G.L. and Rahman, A. 2002.The determinants of internet financial reporting, Journal of

Publications of Jordan University.

Accounting and Public Policy. 21 (5): 371-95.

Baena, V. 2011.The effect of corruption on global

Dharmadasa, Pemarathne, Gamage and Siriyama Kanthi

franchising in emerging markets.International Journal

Herath.

of Business and Emerging Markets, 3(1): 57–74.

2014.

Corporate

Governance,

Board

Basuony, Mohamed A. K. and Mohamed, Ehab K.

Characteristics and Firm Performance: Evidence from Sri

2014.Determinants of Internet Financial Disclosure in

Lanka, South Asian Journal of Management, 21, (1): 7-

GCC

31. 25.

Countries.Asian

Journal

of

Finance

and

- 265 -



Ehab, M. K.A. 2010. Internet Financial Reporting (IFR) in

Journal of Administrative Sciences. 20 (2): 255.

the GCC: extent and practices. Int. J. of Accounting and

Harris, M. and Raviv, A. 2008. A theory of board control and

Finance, 2(1): 113 – 129.

size. Review of Financial Studies, 21:1797-1832.

Eng, L.L., Mak, Y.T. 2003. Corporate governance and voluntary

disclosure.Journal

of

Accounting

Hodge,

F.

and

MainesLaureen.2004.

Does

Search-

Facilitating Technology Improve the Transparency of

and

PublicPolicy. 22: 325–345.

Financial Reporting? The Accounting Review. 79 ( 3):

Ezat, A. and A. El-Masry. 2008. The Impact of Corporate

687–703

Governance on the Timeliness of Corporate Internet

Hussain, H. and Chris Mallin. 2002. Corporate Governance

Reporting by Egyptian Listed Companies. Managerial

in Bahrain, Corporate Governance: An International

Finance, 34(2): 848-867.

Review. 10 (3): 197-210.

Fama, E. 1980.agency problems and the theory of the firm.

Hussain, S. 2009. Corporate Governance: Quantity Versus

Journal of Political Economy, 88(4): 715– 732.

Quality-Middle Eastern Perspective.79-129.

Fan, J and T. Wong (2004), Do External Auditors Perform a

Hunter, Shirley A. and Smith, L. Murphy. 2010. Impact of

Corporate Governance Role in Emerging Markets?

Internet Financial Reporting on Emerging Markets.

Evidence from East Asia.Journal of Accounting

Journal of International Business Research. 8 (2): 21-

Research.43(1): 35–72.

40.

FASB.2000. Chapter 2. Business reporting research project:

Islam, Mohammad, Mohammad Bhuiyan, and Mehedi

electronic distribution of business reporting information.

Tuhin. 2014. The Association between Profitability and

Steering committee report series.

the Extent of Voluntary Disclosure of Financial Information in the Annual Reports: A Study on Listed

RabeloFlávio M.&Flávio C. Vasconcelos. 2002. Corporate

Banks

Governance in Brazil. Journal of Business Ethics. 37(3):

of

Bangladesh.

International

Journal

of

Innovation and Scientific Research. 5 (1): 87-96

321-335. Francis, J., Smith, A. 1995. Agency costs and innovation:

Ismail, N.A. and M. Tayib. 2000. Financial Reporting

Some empirical evidence. Journal of Accounting and

Disclosure on the Internet by Malaysian Public Listed

Economics 19 (2/3): 383–409.

Companies. National Accountants. 13(10): 28-33.

Gray, Sidney and Gerald Chau.2011. Family ownership,

Joshi, P., and AL Bastaki, H. 2000. Determinants of audit

board independence and voluntary disclosure: Evidence

fees: evidence from the companies listed in Bahrain.

from Hong Kong. Journal of International Accounting

International journal of auditing, 4(2): 129-138.

Auditing and Taxation, 19(2): 93-109.

Juhmani, Omar. 2013. Ownership Structure and Corporate

Gujarati, D. 2003. Basic Econometrics, 4th Edition, the

Voluntary

McGraw-Hill Companies, USA.3rd Edition. Gul, F.A., Leung, S. 2004. Board leadership, outside directors’

expertise

and

voluntary

Disclosure:

Evidence

from

Bahrain.

International Journal of Accounting and Financial Reporting.3 (2).

corporate

Kelton, Andrea S. and Ya, Yang. 2008.The impact of

disclosure.Journal of Accounting and Public Policy 23:

corporate governance on Internet financial reporting.

351–379.

Journal of Accounting and Public Policy, 27 (1): 62-87.

Hamdan, A. and Al-sartawi, Abd al Muttaleb M., JaberRaed,

Khan, A. and Ismail, N.A. 2010.A study on the index of

J. 2013.The Effect of Corporate Governance on the

internet financial reporting.International Journal of

Financial and Operational Performance and its Effect on

Postgraduate Business, 2(1): 1-23.

Stock Performance in the Kuwait Stock Exchange.Arab

Khan, M. and Noor, Ismail.2012.Bank Officers’ Views of

- 266 -


Internet Financial Reporting in Malaysia.International

financial reporting practices: Evidence from the UAE,

Conference on Asia Pacific Business Innovation and

Review of Pacific Basin Financial Markets and

Technology Management.57 (9): 75–84

Policies, 16(4).

Khan, M. and Noor, Ismail. 2011. The Use of Disclosure

Mousa, Gehan A. and Abdelmohsen M. Desoky. 2012. The

Indices in Internet Financial Reporting Research. Journal

Association between Internal Governance Mechanisms

of Global Business and Economics, 3 (1):157-173.

and Corporate Value: Evidence from Bahrain. Asian

Kiel, Geoffrey C. and Nicholson, Gavin J. 2003. Board

Academy of Management Journal of Accounting and Finance.8 (1): 67-92. 26.

Composition and Corporate Performance: How the Australian Experience Informs Contrasting Theories of

Nur’ainy, Renny, Bagus Nurcahyo, Sri Kurniasih A., and

Corporate Governance. Corporate Governance: An

Sugiharti B. 2013. Implementation of Good Corporate

International Review11(3): 189-205.

Governance and Its Impact on Corporate Performance:

Koreto, R. J. 1997.When the Bottom Line is Online, Journal

The Mediation Role of Firm Size (Empirical Study from

of Accountancy, 183 (3), 63-65.

Indonesia).

Li Hongxia and Ainian Qi. 2008. Impact of Corporate

Global

Business

and

Management

Research: An International Journal5 (2).

Governance on Voluntary Disclosure in Chinese Listed

Nurunnabi, M. and Hossain, M. 2012. The voluntary

Companies, Corporate Ownership and Control,5 (2).

disclosure of internet financial reporting (IFR) in an

Levy, L., “Reforming Board Reform,” Harvard Business

emerging economy: a case of digital Bangladesh.

Review, 59(1): 166-172.

Journal of Asia Business Studies.6(1).

Tai, Lawrence. 2015. The Impact of Corporate Governance

OECD (Organization for Economic Cooperation and

on the Efficiency and Financial Performance of GCC

Development). 2004. OECD Principles of Corporate

National Banks.Middle East Journal of Business, 10(1):

Governance (Paris: OPCD). OjahK. 2012. Internet financial reporting, infrastructures and

12.

corporate governance: An international analysis. Review

Lymer A., Debreceny, R., Gray,G. and Rahman, A.

of Development Finance.2 (2): 69–83.

1999.Business Reporting on the Internet.London:

Ojo, Marianne. 2009. The role of external auditors in

International Accounting Standard Committee.

corporate

Madhani, P M. 2007. Corporate Governance from

governance:

agency

problems

and

the

Compliance to Competitive Advantage, The Accounting

management of risk. Munich Personal RePEc Archive.

World, 7(8): 26-31.

MPRA Paper No. 28149, 21:48 UTC.

Madhani, P. M. 2014. Corporate Governance and Disclosure

Oyelere, Peter and Ehab K. A. Mohamed.2007. Internet

Practices in India: Domestic Firms Versus Cross-Listed

Financial Reporting in Oman. Global Journal of

Firms.IUP Journal ofCorporateGovernance, 13 (4): 24-

Business Research, 1(2): 45-54. Oyelere, P. and Kuruppu, N. 2012.Voluntary internet

51. 28. Manolescu, Maria, Aureliana-Geta Roman and Mihaela

financial reporting practices of listed companies in the

Mocanu. 2011. Corporate governance in Romania: From

United Arab Emirates.Journal of Applied Accounting

Regulation

Research. 13(3): 298–315

to

implementation.

Accounting

and

Petravick, S. and Gillett, J. 1996. Financial reporting on the

Management Information Systems. 10 (1): 4–24 Millstein, M. I. 2003. “Corporate governance”, Vital

World Wide Web, Management Accounting, 78 (1): 26-

Speeches of the Day, New York, Nov, 70 (15): 3.

29.

Miniaoui, H. and Oyelere, P. 2013, Determinants of internet

Poon, P.L. and Yu. Y. T. 2012. "Degree of Internet corporate

- 267 -

Investigating the Relationship… reporting:

A

research


framework",

Governance and Firm Performance: A Study of Selected

Information

Research, 17(1): 509.

Listed Companies in Sri Lanka.European Journal of

Purba, L., Medyawati, H., Silfianti, W., Hermana B. 2013.

Commerce and Management Research. 2 (6): 123-127.

Internet Financial Reporting Index Analysis, 1 (3):

Xiao, J.Z., Yang, H., Chow, C.W. 2004.The determinants

281–284.

and

Lizzcharly, P., Henny Medyawati, Widya Silfianti, and Budi

characteristics

of

voluntary

Internet-based

disclosures by listed Chinese companies.Journal of

Hermana. 2013. Internet Financial Reporting Index

Accounting and Public Policy23, 191–225.

Analysis: An Overview from the State Owned Enterprise

Xiao,

J.Z.,

Dyson,

R.J.

and

Powell,

P.

L.

in Indonesia. Journal of Economics, Business and

1996.“Theimpactofinformation technology on corporate

Management. 1 (3): 281-284.

financial reporting: acontingency perspective”, British

Rechner, P. L., and Dalton, D. R. 1991. CEO duality and

Accounting Review, 28 (3): 203-27.

organizational performance: A longitudinal analysis.

Yap

Strategic Management Journal, 12 (2): 155–160. and

reforms:

Evidence

from

and

Masoud

and Applied Sciences, 5(10): 1273-1289. Yue-Duan, Guan, Sheu Dwan-Fang and Chu, Yu-Chin.2007.

Finance (IJBAF), 6 (2).

Ownership

Ramadhan, S. 2014. Board Composition, Audit Committees,

Structure,

Broad

of

Directors,

and

Information Disclosure. Journal of American Academy

Ownership Structure and Voluntary Disclosure: Evidence

of Business, Cambridge: ABI/INFORM Global pg. 182.

from Bahrain. Research Journal of Finance and

Zaheer N. 2013.Effects of Duality, Board Size and Board Composition on Corporate Governance Disclosure in

Accounting.5(7). Rijal, Ranjana and G. C., Surya Bahadur. 2010. Corporate

Pakistan.International SAMANM Journal of Finance

Governance and Capital Structure of Nepalese Listed Nepalese

Saleh

Governance in Malaysia.Australian Journal of Basic

Bahrain,

International Journal of Business, Accounting and

Firms",

Zakiah

Abessi.2011.Internet Financial Reporting and Corporate

Ramadhan, S. 2012. Corporate governance provisions, practices

Kiew-Heong,

Economic

and Accounting.1(3). Williams, S. M., and Pei, H. W. 1999. Corporate social

Review,

Forthcoming.Available at SSRN.

disclosures by listed companies on their web sites: An

Thangatorai R., Romlah Jaffar and Zaleha Abdul Shukor.

international comparison. The International Journal of

2011. The Effect of Corporate Governance Mechanism

Accounting, 34(3): 389-419.

on the Voluntary Internet Financial Reporting: A Case of

www.bahrain.com/en/bi/Pages/default.aspx

Malaysia. Recent Advances in Management, Marketing

http://www.moic.gov.bh/En/Commerce/DomesticTrade/Corp

and Finances.ISBN: 978-1-61804-159-3.

orate%20Governance/Documents/bb9903e050a24fc6b65

Velnampy. T and Pratheepkanth. P. 2013. Corporate

190cfcd637cd1BahrainCGCodeEN.pdf

- 268 -

‫‪Jordan Journal of Business Administration, Volume 12, No. 1, 2016‬‬

‫اﻟﻌﻼﻗﺔ ﺑﻳن اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ واﻻﻓﺻﺎح اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت‪ :‬دﻟﻳﻝ ﻣن ﺑورﺻﺔ اﻟﺑﺣرﻳن‬ ‫‪2‬‬

‫زﻛﻳﺔ رﺿﺎ ﺳﻧد‪ 1‬وﻋﺑداﻟﻣطﻠب ﻣﺣﻣد ﻣﺻﻠﺢ اﻟﺳرطﺎوي‬

‫ﻣﻠﺧـص‬ ‫أﺳﻬﻣت اﻟﻌوﻟﻣﺔ واﻟﺗطور اﻟﺗﻛﻧوﻟوﺟﻲ اﻟذي ﻳﺷﻬدﻩ اﻟﻌﺎﻟم ﻓﻲ زﻳﺎدة اﻫﺗﻣﺎم اﻟﺑﺎﺣﺛﻳن ﺑﻣوﺿوع اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ واﻹﺑﻼغ اﻟﻣﺎﻟﻲ‬ ‫ﻋﺑر اﻻﻧﺗرﻧت‪ .‬وﻟﻛون ﻣﻣﻠﻛﺔ اﻟﺑﺣرﻳن ﻣن اﻟدوﻝ اﻟﺗﻲ ﺳﻌت إﻟﻰ ﺗﺑﻧﻲ ﺗطﺑﻳق ﻣﺑﺎدئ اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ ﻓﺈن ﻫذﻩ اﻟدراﺳﺔ ﺳﻌت‬ ‫اﻟﻰ اﺧﺗﺑﺎر اﺛر اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ ﻋﻠﻰ اﻹﺑﻼغ اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت ﻓﻲ اﻟﺷرﻛﺎت اﻟﻣدرﺟﺔ ﺑﺑورﺻﺔ اﻟﺑﺣرﻳن‪ .‬وﻗد ﻗﺎم اﻟﺑﺎﺣﺛﺎن‬ ‫ﺑﻌد ﻣراﺟﻌﺔ اﻟﻌدﻳد ﻣن اﻟدراﺳﺎت اﻟﺳﺎﺑﻘﺔ ذات اﻟﻌﻼﻗﺔ ﺑﺗطوﻳر ﻧﻣوذج ﻟﻠدراﺳﺔ وﻗﺎﻣﺎ ﺑﺎﺳﺗﺧدام ﺗﺣﻠﻳﻝ اﻻﻧﺣدار اﻟﻣﺗﻌدد ﻻﺧﺗﺑﺎر‬ ‫ﻓرﺿﻳﺎت اﻟدراﺳﺔ‪ .‬وﻗد أظﻬرت ﻧﺗﺎﺋﺞ اﻟﺗﺣﻠﻳﻝ اﻹﺣﺻﺎﺋﻲ وﺟود ﻋﻼﻗﺔ ﻣﺣدودة ﺑﻳن اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ ‪-‬ﻣﻘﺎﺳﺔ ﺑﺧﺻﺎﺋص‬ ‫ﻣﺟﻠس اﻹدارة‪ -‬واﻹﺑﻼغ اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت؛ إﻻ أﻧﻪ وﺑﺎﻟرﻏم ﻣن ذﻟك ﻓﻘد ﻛﺎن ﻟﻧوع ﻣؤﺳﺳﺔ اﻟﺗدﻗﻳق‪ ،‬وﺣﺟم ﻣﺟﻠس اﻹدارة‬ ‫ﺗﺄﺛﻳ ار اﻳﺟﺎﺑﻳﺎ ﻋﻠﻰ اﻹﺑﻼغ اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت‪ .‬وﻣن اﺟﻝ ﺗﺣﻘﻳق اﻟﻣزﻳد ﻣن اﻟﺷﻔﺎﻓﻳﺔ ﻓﻲ اﻹﺑﻼغ ﻋن اﻟﻣﻌﻠوﻣﺎت ﻓﻘد أوﺻت‬ ‫اﻟدراﺳﺔ اﻟﺟﻬﺎت اﻟﻣﻧظﻣﺔ ﺑﺿرورة اﻟﻘﻳﺎم ﺑﺈﺻدار دﻟﻳﻝ ﻟﻺﺑﻼغ اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت ﺗﻠﺗزم ﺑﻪ اﻟﺷرﻛﺎت اﻟﻣدرﺟﺔ ﻓﻲ ﺑورﺻﺔ‬ ‫اﻟﺑﺣرﻳن‪.‬‬ ‫اﻟﻛﻠﻣﺎت اﻟداﻟﺔ‪ :‬اﻹﺑﻼغ اﻟﻣﺎﻟﻲ ﻋﺑر اﻻﻧﺗرﻧت‪ ،‬اﻟﺣﺎﻛﻣﻳﺔ اﻟﻣؤﺳﺳﻳﺔ‪ ،‬اﻹﻓﺻﺎح اﻟطوﻋﻲ‪.‬‬

‫‪ 1‬ﻣﺣﺎﺿرة‪،‬اﻟﺟﺎﻣﻌﺔ اﻷﻫﻠﻳﺔ‪ ،‬ﻛﻠﻳﺔ اﻟﻣﺎﻝ واﻷﻋﻣﺎﻝ‪ ،‬ﻗﺳم اﻟﻣﺣﺎﺳﺑﺔ‬ ‫واﻻﻗﺗﺻﺎد‪،‬ﻣﻣﻠﻛﺔ اﻟﺑﺣرﻳن‪. PO.BOX 10878‬‬ ‫‪[email protected].‬‬ ‫‪ 2‬أﺳﺗﺎذ ﻣﺳﺎﻋد‪ ،‬اﻟﺟﺎﻣﻌﺔ اﻷﻫﻠﻳﺔ‪ ،‬ﻛﻠﻳﺔ اﻟﻣﺎﻝ واﻷﻋﻣﺎﻝ‪،‬ﻗﺳم اﻟﻣﺣﺎﺳﺑﺔ‬ ‫واﻻﻗﺗﺻﺎد‪،‬ﻣﻣﻠﻛﺔ اﻟﺑﺣرﻳن‪. PO.BOX 1087‬‬ ‫‪[email protected]‬‬ ‫ﺗﺎرﻳﺦ اﺳﺗﻼم اﻟﺑﺣث ‪ ،2015/5/20‬وﺗﺎرﻳﺦ ﻗﺑوﻟﻪ ‪.2015/11/3‬‬ ‫‪- 269 -‬‬