1. INTRODUCTION:

The dynamic nature of the business world has forced firms to communicate to stakeholders a variety of information. Though the annual report was considered the most common and credible means to communicate information to a large number of shareholders, the cost of producing the document has become a barrier to many firms. The low accessibility of such printed documents has forced firms to adopt newer and more efficient means of communication and disclosure. The internet has emerged as one of the most effective media of communication in the current decade (Andrikopoulos et al., 2013, Kelton and Yang, 2008). Several empirical studies have found that the internet has been used as a primary tool to communicate corporate information (Ashbaugh et al., 1999; Marston, 2003; Sahu, 2107).

Internet has also been used as a tool for providing the services and products to a wide range of customers (Kumar et al., 2013; Aquil and Baghel, 2014). The scenario is no different in India (Mann and Jha, 2015; Ghosh and Ghosh, 2014; Singh and Arora, 2015). Although several studies have been done internationally (Ashbaugh et al., 1999; Fuertes-Callen and Cuellar-Fernandez, 2014), there is lack of research that focuses on the web-based financial disclosure practices of Indian firms (Malhora and Makkar, 2012).

This study focuses on examining the web-based financial disclosure practices of Indian firms. The study is based on a disclosure index developed specifically to examine the extent of financial disclosures in the websites.

2. PREVIOUS RESEARCH:

Studies examining the use of internet as a tool for corporate reporting have been done extensively in developed nations (Craven and Marston, 1999; Hassan et al., 2000). Some cross-country studies examining the disclosure practices in different nations have also been done (Debreceny and Gray, 1999; Allam and Lymer, 2005; Khadaroo, 2005). Most of the above studies have found that corporate websites contain a wide range of information. They have also reported that internet as a tool for communication was used due to the low cost and wide reach.

Though most of the prior studies have focused on general aspects of disclosure, some studies have focused on specific information disclosure such as financial disclosures, marketing disclosures and social disclosures. A study examining the financial disclosure of New Zealand firms found that 70% of the sample firms presented some financial information in the websites (Cheng et al., 2000; Budisusetyo and Almilia, 2007). Some studies also found that the websites were used effectively for investor relation activities (Deller et al., 1999). Studies examining the social disclosure in the websites found that firms disclose more of environmental information (Rikhardsson et al., 2002).

A study in Netherlands by Lybaert (2002) found a growth in the number of companies using websites to disclose financial information. The study also indicated that internet reporting was not as detailed as traditional reporting. However, the study found that most firms indulge in internet reporting to compete with competitors. A similar study by Momany and Shorman (2006), examining the extent of financial reporting on the websites of Jordanian companies found that about 45% of sample firms had a website, with 70% of the websites reporting financial information. The study also found that the most disclosed financial information was financial highlights, followed by comprehensive financial statements. The study also reported that firm size, leverage and ownership had an impact on the extent of financial reporting on the websites. Almilia (2009) in a study based on Indonesian firms reported that variations in the content of the website were related to firm size, leverage, majority shareholding, auditor and industry type.

Aly et al., (2010), in a study of Egyptian firms found that financial characteristics such as profitability, foreign listing and industry type explained variations in the degree of internet reporting. Lai and Li (2010), in Taiwan found that disclosure of information in the internet had an immediate effect on the stock. The study also showed that firms disclose only partial financial information in their website unlike in traditional disclosure. The study also found that firms with internet financial reporting experience abnormal returns. A study in Croatia by Pervan, Ivica; Sabljic, Marko (2011) found that internet reporting was gaining increasing prominence. Garg and Verma (2010), in India found that the extent of corporate reporting was related to firm size and association with business house, while Malhotra and Makkar (2012) found that the banking sector firms in India provided more information on the internet than firm from other sectors.

Most of the studies examining the extent of internet reporting have used a disclosure index constructed specifically for the purpose. The website of the sample firms is examined to check the disclosure of the information in the index and is scored accordingly. The total score obtained by the firm is considered as the disclosure score (Ashbaugh et al., 1999; Barman, 2014; Debreceny et al., 2002; Malhotra and Makkar, 2012; Yassin, 2017). A similar approach has been followed in this study.

Some of the prior studies have highlighted the lack of regulations to govern the internet reporting practices. As all the information made available by a firm on the website is voluntary, some studies have indicated that accounting boards can formulate broad guidelines for the same (Lymer et al., 1999; Lodhia et al., 2003).

The review of literature highlights that internet reporting is emerging as an important means of corporate reporting. However, studies in India have not examined the use of internet as a tool for financial reporting. The present study is an attempt to fill the gap.

3. OBJECTIVES:

The study has the following objectives:

· To examine the nature of financial information disclosed in the corporate websites of Indian firms

· To determine the impact of industry sector and age of firm to the extent of financial information disclosed in the corporate websites of Indian firms

4. RESEARCH METHODOLOGY:

The major source of data for the study was the corporate websites of the firms. The period of study was June 2016. The websites of the firms was examined during this period.

For the purpose of the study, a sample of 150 firms was selected based on the market capitalization. As banking, finance and insurance sector firms in India are governed by different disclosure regulations, they were excluded from the study. The final sample for the study was 136 firms. The sector-wise details of the sample firms are presented in Table 1.

Table 1: Sector-Wise List of Sample Firms

Industry Groups	Year 2016
Industry Groups	Number	%
Engineering	28	20.5
Minerals and Metal	19	14
Construction	16	11.8
Chemicals	25	18.4
Services	32	23.5
Consumer Goods	16	11.8
Total	136	100

To determine the extent of financial disclosure on the website, a disclosure index was prepared for the study. The disclosure index was constructed based on information considered important from an investor’s perspective. The disclosure index consisted of 15 items of which 5 indicate the availability of financial reports such as annual report, quarterly report, financial overview, corporate governance report and cash flow statement. These items were scored on a 0-3 scale depending on the availability of data for current and previous years. The remaining items indicate the disclosure of information about profitability, dividends, share price, net turnover, share capital, market capitalization, return on capital employed etc. The maximum score possible for a firm is 20. The disclosure score of each firm is calculated as the score obtained by the firm in relation to the maximum possible score.

5. EMPIRICAL RESULTS:

The classification of the sample firms based on the financial disclosure on the corporate websites is depicted in Table 2.

Table 2: Web-Based Financial Reporting Score of Firms

Disclosure Index (%)	Year 2016
Disclosure Index (%)	Number	%
0 – 25%	80	58.8
25 – 50%	39	28.7
50 – 75%	17	12.5
75 – 100%	0	0
Total	136	100

The table shows that 58% of the sample firms have a disclosure less than 25%. The disclosure in excess of 25 % is by 28% of the firms while only 12% of the firms have a disclosure score greater than 50%. However, there are no firms that have disclosed in excess of 75% indicating that web-based disclosure of financial information is still in the early stages in India.

Table 3 shows the detailed results of the disclosure of the individual attributes. The table shows that the most easily available information on the websites was the annual reports (74%). The most disclosed financial information was the quarterly results followed by the investor relation section. Although 66% of the sample firms reported some information about the financial ratios, only 33% of the firms had reported details about the profitability of the firm. Only 12% of the firms had reported the details about the ROCE (Return on capital employed) achieved by the firm. A large number of firms (30%) had information about the dividend policy and dividend paid on the websites.

Table 3: Attributes Disclosed in the Websites of Sample Firms

Attribute	No. of Firms	% of Firms
Annual Report	101	74
Quarterly Results	98	72
Financial Ratios	90	66
Investor Relation	87	63
Share price	51	37
Profitability Details	45	33
Dividend Details	41	30
EPS	39	29
Financial Overview	38	28
Net turnover	33	24
Company share capital	26	19
Market capitalization	21	15
ROCE	17	12

The study also examined the disclosures practices across the various sectors of firms. Table 4 shows the disclosure made by firms in particular sectors. In the engineering sector, the maximum disclosed attribute is the annual report with 76% of the firms providing access to the annual report on the websites. Firm that belong to the mineral and metal sector and the consumer goods have maximum disclosure in the investor relation section (73% and 89%) followed by the disclosure of quarterly results (72% and 80%). The service and construction sector firms have maximum disclosure about the quarterly results.

The results in Table 4 indicate that disclosures relating to profitability and ROCE are highest for firms operating in the consumer goods sector. The construction sector leads in disclosure relating to market capitalization (15%). The engineering and mineral sector firms lag behind in terms of disclosure related to many of the attributes such as Financial overview, Net turnover, EPS, share capital, market capitalization and ROCE.

However, the overall disclosure of most of the attributes across the sectors is less than 50% indicating the Indian firms provide only few disclosures on the websites. Also, the firms have a greater scope to add more details in the websites to improve their transparency.

Table 4: Sector-Wise disclosure

Attribute	Engineering (% of firms)	Minerals and Metal (% of firms)	Consumer Goods (% of firms)	Services (% of firms)	Construction (% of firms)	Chemicals (% of firms)
Annual Report	76	56	74	78	45	81
Quarterly Results	68	72	80	81	69	78
Financial Ratios	56	63	78	80	67	74
Investor Relation	61	73	89	81	53	72
Share price	25	32	37	42	43	45
Profitability Details	27	31	56	33	51	29
Dividend Details	35	34	32	31	26	29
EPS	20	23	31	26	28	29
Financial Overview	19	25	28	23	24	21
Net turnover	20	20	21	24	23	23
Company share capital	12	13	19	18	15	15
Market capitalization	9	9	11	12	15	11
ROCE	8	7	16	15	9	12

Relationship between company characteristics and web-based disclosures:

As there was a great variance in the nature of disclosures across various sectors, a one-way ANOVA was done to examine the significance of the variation. The results of the test are presented in Table 5.

Table 5: Relationship between Industry sector and web-based disclosure

	Sum of Squares	df	Mean Square	F	Sig.
Between Groups	1283.918	58	418.944	3.805	0.001
Within Groups	2939.840	77	113.054
Total	4223.758	135

The results in Table 5 indicate the existence of a significant relationship between the industry sector to which the firm belongs and the extent of financial disclosure on the corporate website. The results also indicate the possibility that firms in a particular industry have disclosure practices that might be similar among competing firms.

Table 6 shows the relationship between the age of the firm and the extent of disclosure on the websites. The results indicate that there is no significant relationship between the age of the firm and the extent of disclosure on the websites. This indicates that the firm adopts web-based disclosure policies that are in accordance to the requirements of the industry and the competitors.

Table 6: Relationship between age of the firm and extent of web-based disclosure

	Sum of Squares	df	Mean Square	F	Sig.
Between Groups	9078.546	5	328.564	1.67	0.152
Within Groups	7685.465	130	185.654
Total	16763.011	135

6. SUMMARY AND CONCLUDING REMARKS:

The internet has risen to become one of the cost effective means to disseminate information to a larger group of people. Although there are no rules governing the disclosure of information on the websites, many firms disclose a variety of information in the corporate websites. Although prior studies in India have indicated that firms use internet as a tool for disclosure, there is not much evidence on the use of internet as tool to disseminate financial information pertaining to the firm. This paper adds to the limited literature examining web-based disclosure policies of Indian firms.

The study examined the websites of 136 firms operating in the non-financial sector in India. All the firms in the study had corporate websites, indicating that use of internet as a tool for communicating is widely accepted in India. However, 58% of the firms have a disclosure between 0 – 25% and only 12% of the sample firms had disclosure greater than 50%. This shows that Indian firms have some reluctance in the use of websites as tool to disseminate financial information. The sector wise analysis indicated that some sectors have a tendency to disclose certain category of financial information. The study also found that industry sector has a significant relationship to the extent of financial disclosure made by a firm in the websites. This indicates that firms operating in a sector have similar disclosure policies that are relevant to its stakeholders. The study also found that the age of the firm does not have a significant relationship to the extent of financial disclosure. This indicates that although new firms have comparatively lesser information to share with the stakeholders, the disclosures on the websites do not reflect it.

As the study has examined only a small section of the websites, there is ample scope for future research. Future studies can examine the value-relevance of the information discloses by the firms on the websites to various stakeholders. The study can also be extended to include more firms, so as to make generalizations possible.

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Received on 15.03.2018 Modified on 11.04.2018

Asian Journal of Management. 2018; 9(2):891-895.

DOI: 10.5958/2321-5763.2018.00141.5