Practice of web-based financial reporting by listed companies

Good corporate governance ensures accountability and transparency, thus maximizing long-term shareholder value. Corporate governance has been getting much-needed attention from regulatory bodies and practitioners in Bangladesh in recent years. In 2006, the Securities and Exchange Commission (SEC) took an initiative to institutionalise the practice of good corporate governance in Bangladesh. It issued a notification applicable for all listed companies in order to develop sound corporate governance practices in the interest of the capital market and the investors. To evaluate a firm's performance and corporate governance system, we need to access information about the company's performance, as well as its other related activities. The emergence of the internet technology has provided a new way for companies to communicate corporate information to stakeholders. And this way we can easily have access to the company information. Internet tools ease the dissemination of financial information for stakeholders, analysts and other interested parties. Communicating information on the internet will increase compliance with the 'fair disclosure' regulation, which requires companies to disclose information to the general public rather than to selected groups. Regulatory bodies are now requiring listed companies to disclose their financial and operational activities through their company websites. On January 17, 2010, the SEC issued a new directive asking listed companies to make their quarterly financial statements available on the company websites. This article attempts to show the practice of web-based financial reporting by listed banking companies, as the banks played a significant role during the recent capital market volatility. A survey of the web-based financial reporting system of the 30 listed banking companies was conducted between March 15-20, 2011. And all of these listed banking companies were found to have their own websites. Several factors like strong industry competition, strict regulation by Bangladesh Bank and SEC, performing international operations, introducing electronic banking etc. have driven the banking sector to adopt internet as a medium of web-based financial reporting on a broader scale. However, 26 out of the 30 companies comply with the SEC directive for providing quarterly financial statements on their websites. Another purpose of the SEC directive was to ensure that companies provide detailed information of their quarterly financial statements which normally cannot be accommodated in brief newspaper advertisements. And it is found that the 26 companies which comply with this directive also provide details of the financial statement on their websites. Another SEC requirement was the annual reports of the previous three years should also be linked to the company website. We can get more idea about a company's performance if we get at least three previous years' data regarding its financial performance. On this, 24 companies provided their annual reports of the preceding three years on their websites. The presentation of the financial reporting is in four formats: PDF, HTML, Word document or a combination of these. To view a PDF file, the user requires an Adobe Acrobat PDF Reader to be installed on his computer. PDF file can also be downloaded. For Hyper Text Markup Language (HTML) format we can only show the date but cannot download. According to the survey, it is found that 23 of these companies presentation format is in PDF. Only HTML format is used by four companies and only two companies use PDF and HTML in both format and one uses PDF and Word in both formats. So, it is clear that most of the companies uploaded PDF version of their annual reports on their websites. The problem of a PDF file is that it cannot be modifymanipulate the data of the most of the PDF file for the research purpose. In addition, most of the companies also fail to provide adequate and efficient graphs to describe its financial position. Now, let us look into another two important issues: Corporate Social Responsibility (CSR) and Investor Relations. Corporate Social esponsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. The concept and practice of CSR is comparatively new strategy for the corporate sector of Bangladesh. Bangladesh Bank also announced that it would monitor the adoption of corporate social responsibility guidelines by banks and financial institutions in the country. In the survey of the websites, it was found that only 10 out of the 30 banking companies provided CSR information on their websites. Investor Relations (IR) is a department present in many medium to large public companies, which provides investors with an accurate account of the company's affairs. Many companies now have dedicated IR officers, who oversee most aspects of shareholder meetings, press conferences, private meetings with investors, investor relations sections of company websites, and company annual reports. The IR department works with corporate matters that affect shareholders. It was found in the survey that only one company's website has a separate section under the heading "Investor Relations". With the vision of creating digital Bangladesh, the practice of web-based reporting by financial institutions needs to be enhanced. A digital society ensures an ICT driven knowledge-based society where information will be readily available to everyone. Furthermore, it is expected that in the near future, investors will use company websites on a broader scale to understand and to evaluate performance of the company, which will help them to make the right investment decisions. Thus, we expect that the listed companies will substantially improve their websites, providing detailed financial and other related information. The writer is of the Department of Finance, University of Dhaka. He can be reached at e-mail: shovon_8512@yahoo.com