Accounting disclosure, social learning and corporate reputation: evidence from Thai listed firms.

• Author: Ussahawanitchakit, Phapruke
• Position: Report - Survey

1. INTRODUCTION

   In a recent year, firms' transparency becomes a key requirement of doing businesses in the uncertain and turbulent markets and environments. Stakeholders need firms to disclose their business transactions, events and activities, including accounting disclosure, information disclosure and others in order to present valuable information for their decision making in participating and investing the firms' operations and practices. For the accounting literature, accounting disclosure is an intention of firms' presenting transparency by providing and reporting clear financial information for stakeholders' usefulness. Besides, it explicitly requires the high standards for financial reporting, the conduct of an independent audit annually, the effective channels for fair and timely dissemination of other corporate information, and the provision of analysis and advice by external experts (Al-Akra et al., 2010). Also, it influences market liquidity by reducing information asymmetry among market participants (Lim et al., 2003). It is associated with a reduction in information asymmetry. Firms with more accounting disclosure seem to present higher quality of financial information and others and communicate the information to stakeholders efficiently and effectively. They are apparent to achieve their reputation and recognition. Accordingly, accounting disclosure plays a main determinant of driving and explaining firms' reputation. Then, the relationships between accounting disclosure and corporate reputation are investigated in details.

   Interestingly, corporate reputation becomes an outcome of accounting disclosure. It is the overall evaluation of the extent to which firms are substantially good or bad (Keh and Xie, 2009). It occurs from quality of inputs, quality of productive assets, media rankings, certification of achievement, and affiliation with high status institutions. Here, social learning is also proposed to become the antecedent of corporate reputation and the moderator of the accounting disclosure-corporate reputation relationships. Mainly, it is a process of negotiation, subject to conflicts of interests amongst players with rather different capabilities, commitments, cultures, and contexts (Hyysalo, 2009). Besides, it outstandingly describes changes in behaviors that result from the social influence of social actors by combing information about the potential outcomes of a behavior from various sources to make predictions about the outcomes before engaging in the behavior (Onyemah et al., 2010). Hence, the effects of accounting disclosure and social learning on corporate reputation are examined and the moderating influences of social learning on the accounting disclosure-corporate reputation relationships are explicitly verified and tested.

   In this study, the relationships among accounting disclosure, social learning and corporate reputation are outstandingly investigated. This study aims at examining the effects of accounting disclosure on corporate reputation of Thai listed firms via social learning as a moderator. In this study, 114 Thai listed firms are the sample of the study. The key research questions are: (1) how accounting disclosure has a significant effect on corporate reputation, (2) how social learning has an important impact on corporate reputation, (3) whether social learning moderates the accounting disclosure-corporate reputation relationships, and (4) whether the aforementioned relationships are positive.

   This study is outlined as follows. The first section reviews existing significant literature in the areas and streams of accounting disclosure, social learning and corporate reputation, links between the concepts of the aforementioned variables, and develops the key research hypotheses of those relationships. The second explicitly details research methods, including data collection, measurements, and statistics used. The third gives the results of the analysis and the corresponding discussion. The final summarizes the findings of the study, points out both theoretical and managerial contributions, and presents suggestions for further research as well as the limitations of the study.

2. RELEVANT LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT

   Here, accounting disclosure, social learning and corporate reputation are the independent variable, moderating variable and dependent variable of the study respectively. Thus, the conceptual, linkage, and research model presents the associations among accounting disclosure, social learning and corporate reputation as shown in Figure 1 below.

   [FIGURE 1 OMITTED]

   2.1 Accounting Disclosure

   Accounting disclosure refers to firms' regulated financial reports through presenting financial statements, footnotes, management discussion and analysis, and other regulatory filings (Healy and Palepu, 2001). Mainly, it is critical for the functioning of an efficient capital market and is also potentially important means for management to communicate firm performance and governance to outside investors. Also, accounting disclosure explicitly reflects the requirements of accounting regulations, the location of disclosure items in the annual report and the limitations on the availability of regulations (Abdelsalam and Weetman, 2007). Basically, it helps enhance the efficient allocation of resources in a capital market economy. Mainly, it is a means of increasing the credibility of management practices. Firms with greater accounting disclosure tend to report financial information relating to accounting regulations and other relative requirements. They have made an attempt to protect executives' behaviors and activities in influencing the reported earnings in order to maximize their interests, improve their reputation, and reinforce the stock returns and their compensation plans (Iatridis, 2008). Hence, accounting disclosure has a significant impact on corporate reputation. It is likely to influence the increasing level of corporate reputation.

   Accounting disclosure becomes a key driver of explaining and determining corporate reputation. It definitely requires the high standards for financial reporting, the conduct of an independent audit annually, the effective channels for fair and timely dissemination of other corporate information, and the provision of analysis and advice by external experts (Al-Akra et al., 2010). Likewise, accounting disclosure distinctively influences market liquidity by reducing information asymmetry among market participants (Lim et al., 2003). It is associated with a reduction in information asymmetry. Then, it enhances firms to achieve firms' reputation and image TO gain their survival and sustainability in the turbulent and uncertain markets and environments. Firms with more accounting disclosure seem to present higher quality of financial...