Influences of governance practice and social learning on disclosure quality and accounting sustainability of listed firms in Thailand.

• Author: Ussahawanitchakit, Phapruke
• Position: Report

1. INTRODUCTION

   Nowadays, governance practice is a significant business activity that helps enhance stakeholder reliability and acceptance and provide corporate reputation and image. It has also promoted them to survive and sustain in the turbulent markets and uncertain environment. Accordingly, governance practice is proposed to become a main driver of explaining disclosure quality and accounting sustainability. The greater the governance practice tends to provide, the more the disclosure quality achieves the higher accounting sustainability. Also, governance practice is an ability of firms to provide a set of stakeholder responsibility relationships in addition to the structure for setting, achieving and monitoring corporate objectives and performance (Windsor, 2009). Firms with greater governance practice are likely to behave, act and do business activities by concerning with stakeholder responsibility. Here, governance practice includes ownership structure and influence, financial stakeholder rights and relations, financial transparency and presentation, and board structure and processes. Firstly, ownership structure and influence is an ability of firms to monitor management actions and limit their opportunistic behavior that protects the interests of residual claimants, shareholders, and bondholders (Ashbaugh-Skaife et al., 2006). Secondly, financial stakeholder rights and relations is an ability of firms to reflect the balance of power between stakeholders (bondholders and shareholders) and management (Ashbaugh-Skaife et al., 2006). Thirdly, financial transparency and presentation is an ability of firms to facilitate the monitoring of managements' actions and makes it less likely that management will act opportunistically (Ashbaugh- Skaife et al., 2006). Lastly, board structure and processes is an ability of firms to deal with board size and composition, board leadership and committee structure, and competent and engaged board members (Ashbaugh-Skaife et al., 2006). Hence, the relationships among governance practice, disclosure quality and accounting sustainability are thoroughly investigated in this study.

   Social learning is another determinant of disclosure quality and accounting sustainability. Mainly, it plays an important role in explaining a level of disclosure quality and accounting sustainability. It has become a valuable practice that affects firms' survival and sustainability though in intense competitive markets and environments. Then, social learning is proposed to enhance their disclosure quality and accounting sustainability. Interestingly, social learning is the learning that occurs among different participants within a policy sector (Meijer and Vrom, 2009). In other words, it is concerned with learning processes that take place among government, businesses and socially active bodies. Firms with greater social learning tend to understand stakeholders' needs, wants, expectations, and requirements and respond to them very well. Moreover, social learning includes organizational actions and relationships, and social communication conduct. Firstly, organizational actions and relationships are an ability of firms to understand the society's needs, requirements and expectations that provide valuable practices, activities and operations in doing businesses. Secondly, social communication conduct is an ability of firms to present organizational information and reports to the society clearly and honestly. Thus, social learning is examined by linking to disclosure quality and accounting sustainability.

   For the outcomes of implementing governance practice and social learning, both disclosure quality and accounting sustainability are consequences of business practices, activities and operations. Firms with greater governance practice and social learning seem to provide more disclosure quality and achieve better accounting sustainability. Disclosure quality is the presentation of firms' financial information and other related information through the process of providing information about items in the financial statements, including footnotes, supplementary schedules, or other means (Shaw, 2003). Besides, it clearly interacts to influence the usefulness of financial information. Likewise, accounting sustainability is an outcome of providing best accounting practices, activities, procedures, and methods. Mainly, it is the representing the process for information collection and communication to support internal decision making to implement corporate sustainability (Burritt and Schaltegger, 2010). Essentially, it presents the results of the demands from managers to position the company in society and the market and to communicate achievements. In sum, the associations among governance practice, social learning, disclosure quality, and accounting sustainability are verified outstandingly.

   Interestingly, the relationships among governance practice, social learning, disclosure quality, and accounting sustainability are clearly examined. Governance practice includes ownership structure and influence, financial stakeholder rights and relations, financial transparency and presentation, and board structure and processes; and social learning consists of organizational actions and relationships and social communication conduct. Hence, the objective of this study is to investigate the impacts of governance practice and social learning on disclosure quality and accounting sustainability of listed firms in Thailand. Here, 114 Thai listed firms are the sample of the study. The key research questions are: (1) how ownership structure and influence have a significant relationship with disclosure quality and accounting sustainability, (2) how financial stakeholder rights and relations have an important association with disclosure quality and accounting sustainability, (3) how financial transparency and presentation have a potential interaction with disclosure quality and accounting sustainability, (4) how board structure and processes have a critical effect on disclosure quality and accounting sustainability, (5) how organizational actions and relationships have an outstanding influence on disclosure quality and accounting sustainability, (6) how social communication conduct has a main impact on disclosure quality and accounting sustainability, (7) how disclosure quality has a key determinant of accounting sustainability, and (8) 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 governance practice (ownership structure and influence, financial stakeholder rights and relations, financial transparency and presentation, and board structure and processes), social learning (organizational actions and relationships, and social communication conduct), disclosure quality, and accounting sustainability, 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 REVIEWS AND HYPOTHESES DEVELOPMENT

   As mentioned earlier, governance practice (ownership structure and influence, financial stakeholder rights and relations, financial transparency and presentation, and board structure and processes) and social learning (organizational actions and relationships and social communication conduct) are antecedents of disclosure quality and accounting sustainability of listed firms in Thailand. Then, governance practice and social learning are independent variables, disclosure quality is the mediating variable, and accounting sustainability is the dependent variable of the study respectively. All positive relationships are explicitly hypothesized. Thus, the conceptual, linkage, and research model presents the associations among governance practice, social learning, disclosure quality, and accounting sustainability as shown in Figure 1 below.

   [FIGURE 1 OMITTED]

   2.1 Governance Practice

   Governance practice is defined as an ability of firms to provide a set of stakeholder responsibility relationships in addition to the structure for setting, achieving and monitoring corporate objectives and performance (Windsor, 2009). Distinctively, it is concerned with the adoption of recommended standards and practices to increase financial transparency and fiduciary accountability and enhance corporate social responsibility by promoting firms' financial information disclosure and others. Firms with greater governance practice are likely to behave, act and do business activities by concerning with stakeholder responsibility. They seem to enhance the oversight function of the board of directors, and restore public confidence in the integrity of financial reporting (Chen et al., 2007). Also governance practice refers to a set of constraints on managers and shareholders as they bargain for the distribution of firm value (Nelson, 2005). It is a continuum of constraints on managers, boards of directors and shareholders. Besides, it reduces the conflicts of interest between minority shareholders and insiders, and tends to increase its firm value by reducing information asymmetry and increasing management efficiency. Likewise, governance practice has an important impact on enhancing firm survival. It becomes a significant driver of...