Segmental reporting and competitive disadvantage: a study of Malaysian companies

This study aims to investigate whether competitive disadvantage is experienced by Malaysian companies as they disclose segmental information under the new accounting standard known as FRS 114, Segment Reporting. The study consists of 374 Malaysian publicly listed companies which disclosed segmental information in their 2006 annual reports. Four hypotheses were developed to examine the relationship between segmental reporting disclosure and competitive disadvantage. The logistic regression model was employed to test the formulated hypotheses. The results reveal four main points: a) smaller companies experience greater competitive disadvantage than larger companies as they disclose segment information; b) disclosing the business segment as the primary segment does not lead to greater competitive disadvantage; c) companies which are highly leveraged do not experience greater competitive disadvantage as they disclose segmental information; d) there is no significant association of competitive disadvantage with industrial membership. The insights of this study should benefit various interested stakeholders, as Malaysian companies adopt the new FRS 114, Segment Reporting which calls for more extensive reporting compared to the old standards, IAS 14 and MASB 22.