CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

The information technology revolution, in particular the advent of computer technology, has
significantly affected accounting practice and accounting communication. Many firms are
now utilizing the advantages of the Web for disseminating financial information. Firms’
stakeholders such as shareholders, employees, creditors, customers, suppliers need fast and
reliable financial information for decision making (Sia, Brahmana, & Memarista, 2016). In
the ancient times, firms were communicated their financial information with their
stakeholders through the traditional paper based annual reports. This paper based annual
reports have serious limitations and are becoming increasingly less timely, especially with the
increase in geographic investor dispersion, they have this become less useful for decision
making purpose (Debrenceny, Gray, & Rahman, 2002).

Nowadays firms improve their information technology infrastructures, and communicate their
all financial related materials and other information through the Internet. Corporate Internet
Reporting (CIR) enables firms new opportunities to replace and enhance traditional ways of
investor and stakeholder communication enabling disclosure of financial and investor related
information to wider audience where the specific needs of the information users would be
met and ensuring equitable access to information through the use of descriptive content and
attractive presentation formats available in firms’ websites (Ajward & Silva, 2019; Kelton &
Yang, 2008). CIR refers to the financial disclosure through the Internet of historical and
financial data and the exposition of the current situation and future plans. It provides the
financial information to the principals and stakeholders in regards to the investment decision-
making and market efficiency (Chek, Mohamad, Yanus, & Norwani, 2013).

More than that, users can benefit in a variety of ways depending on the extent to which the
capabilities of the medium are exploited. Possibilities include enhanced timeliness, ease of
access and search, and improved facilities for data extraction, automatic comparisons, and
analysis. The ability of the medium to handle the reporting of greatly expanded information
fits well with recent calls in accounting for increased disclosure of a broad range of
information (Almilia & Budisusetyo, 2008). Firm will reduce information asymmetry when
there is more disclosure information through the Internet (Diamond & Verrecchia, 1991; Sia

1
et al., 2016). High disclosure of information can lead to better performance because it
improves the firms’ image, reputation, and trustworthiness (Sia et al., 2016).

Greater demand for web-based financial reporting has led to an increase in the number of
market participants, which might itself lead to greater market efficiency (Giner & Larran,
2002). Furthermore, the ability of firms to provide more timely information has been
enhanced, as distribution of information via websites can take place as soon as it is produced,
and further enhancing pricing efficiency (Giner & Larran, 2002). The borderless nature of
CIR practices also has the potential to “help listed firms to attract new shareholders, thus
enabling firms to maintain a healthy demand for shares” (Craven & Marston, 1999).
Similarly, CIR practices might have an impact on the firms' market value and the cost of
capital, as relevant information about firms seeking international finance will be more
accessible to global investors, reducing investment risk (Debrenceny et al., 2002).

The most commonly CIR is defined as the use of Internet as a form of media by the firms for
voluntary dissemination of financial and investor related information through websites
(Marston & Polei, 2004; Oyelere, Fisher, & Lasward, 2003; Debrenceny et al., 2002; Pinto &
Picto, 2016). The demands of voluntary disclosure via Internet reporting increase the Comment [a1]: Please arrange it as per
alphabet order
curiosity among investors at the present time (Aly, Hussainey, & Simon, 2010). As shown by
one of the study, more available information would help investors’ decision making reach the Comment [a2]: ?????

optimum level (Shehata, 2014). Sia et al., (2015), examine the impact of CIR on firm
performance of non-financial listed companies in Malaysia. The findings of the research
suggest that firms should disclose more information through the Internet in order to ensure
the accessibility of financial information for stakeholders, and this will present a better image
and reputation of the firm’s best practices in financial performance. Furthermore, the ability
of firms to provide more timely information has been enhanced, as distribution of information
via Internet can take place as soon as it is produced, further enhancing pricing efficiency
(Giner & Jorge, 2002).

Many studies have been carried out in the context of CIR in global context aimed at
understanding the extent of CIR adoption of a particular country and furthermore certain
studies are determining the factors that drive the adoption of CIR among the firms. Most of
the studies only assess the impact of firm related economic factors and technological
infrastructure on the extent of CIR (Ojah & Mokoteli, 2012; Aly, Hussainey, & Simon, 2010;
Spanos, 2014), some more studies have been carried out to identify a relationship between the

2
impact of corporate governance on CIR (Kelton & Yang, 2008; Al maskati & Hamdan, 2017;
Botti, Boubaker, Hamrouni, & Solonandrasana, 2014). Some of the studies investigated the Comment [a3]: Please arrange it as per
alphabet order.
relationship between board composition and CIR (Sandhu & Singh, 2019). Whereas only
limited studies have been carried out to identify a relationship between the impact of CIR on Comment [a4]: and

firm performance (Sia et al., 2016; Elsayed, 2010). Comment [a5]: Please arrange it as per
alphabet order.

As a result, this study investigates the impact of corporate internet reporting on firm
performance in Sri Lankan banks, diversified financials and insurance firms as per Global
Industry Classification Standard (GICS). This study might assist to investors, future
investors, policy makers, government, corporate managers and economists on range of
venues to sustain their corporate objectives.

1.2. Problem of the Study

Firms’ stakeholders need fast and reliable financial information to satisfy their requirements
for timely decision making. Internet reporting can be used as a new information
communication tool to provide information quicker and timelier in better and more effective
ways (Jones & Xiao, 2003). Listed firms which have and in need of the potential to attract
future investors to ensure more capital flow for the firm to secure a sustainable growth tends
to adopt modern trend of practicing web presence for voluntary information dissemination.
The existence of information asymmetry is an important driver of investor uncertainty
(Debrenceny et al., 2002). When the firm disclose more and more information it will reduce
information asymmetry and then help to attract more investors (Alebrahem, 2018). If they
invest more money, production and sales will be increased. It will lead to increase the firm
performance.

In the developed countries, it is very common phenomenon that firms use Internet to disclose
all information to shareholder time to time. But in the developing countries, this is not much
developed and it is still in beginning stage (Alebrahem, 2018). Sri Lanka is a developing
country so this study is needed and it will help to improve the Internet reporting as fruitfully.
Although numerous studies done in different countries, some of researchers found mixed
outcomes where some concluded that there is a positive impact over the firm performance
(Hunter & Smith, 2009; Sia et al., 2016), and some conclude that there is no impact over the Comment [a6]: Please arrange it as per
alphabet order
firm performance (Alebrahem, 2018). As well as there is a dearth of the studies in the Sri
Lankan context. Therefore, this study is aimed to test this issue furthermore in the Sri Lankan

3
context specifically in the case of banks, diversified financials and insurance firms which are
listed in Colombo Stock Exchange (CSE), Sri Lanka by selecting one year period from 2018
to 2019.

1.3. Research Questions

The following research questions are developed by the researcher on the basis of research
problem:

RQ 01: Does corporate internet reporting influence on firm performance?

RQ 02: Is there any relationship between corporate internet reporting and firm performance?

1.4. Research Objectives

Research objectives can be outlined as follows:

 To examine the impact of corporate internet reporting on firm performance.

 To investigate the relationship between corporate internet reporting and firm
performance.

1.5. Significance and Contribution of the Study

This study will add value to various parties specifically and mutually as discussed below:

 The first beneficiaries of this study will be the corporate managers. Because they are Comment [a7]: beneficiary

accountable to the owners of the firm. They show their accountable through the
internet reporting. This study also helps them to disseminate additional information in
a timely manner, add more flexibility, and reduce disclosure cost.
 CIR plays major role in attracting potential investors to the firms, thus this study will
enable them to understand the importance of their role in ensuring the transparency
among the owners and minimizing the information gap that will be improving their
quality of service. The financial information disclosed via the internet is mostly up to
date and is presented in various multimedia formats, making the information easier to
use in decision-making.
 The expansion of the Internet encourages firms to adopt it as an effective means of
disclosing information for the benefit of stakeholders. This study aims to examine

4
 CIR practice adoptions in Sri Lanka by examining impact of CIR on firm
performance.
 The increasing use of the Internet has created a new opportunity for firms to
disseminate different types of information to their current and potential investors via
the Internet. This type of voluntary disclosure, CIR can improve the disclosure quality
and the transparency to satisfy all users’ needs.
 Given the firms’ willingness to fulfil the needs of stakeholders for accurate
information in a timely basis, CIR demands a continuous updating of information
disclosed online.
 The findings of the study will be practically useful for not only managers, it help to all
stakeholders in the firms to make their decisions in a proper manner regarding
investment.

1.6. Research Methods and Approach

The study adopts quantitative approach to collect the related data for analysing and finding
the result of the research problem. This study derived a secondary data.

The Colombo Stock Exchange (CSE) has 290 firms representing 20 GICS industry groups as Comment [a8]: ???????/
th
at 20 January 2020 as per the scope of the study, only the listed banks, diversified financials
and insurance firms were selected for the study purposes.

1.7. Limitations of the Study

During the study period the researcher has to overcome the challenges to complete this study
such as:

 This study uses a sample of 68 banks, diversified financials and insurance firms out of Comment [a9]: used

the 290 listed firms in CSE, Sri Lanka. So, the findings can’t be generalized to other
firms in CSE, Sri Lanka.
 Despite the fact that reliable conclusions can be made from this study, data collected
for this study is specific to the selected listed firms, so may not necessarily apply to
some of the firms listed but not covered in this study and firms not listed in the CSE.
The result and the interpretation are completely rigid and from the viewpoint of the
researcher. And statically errors may arise.

5
 CIR practices are highly associated with the technological improvements such that
CIR practices observed are subjected to changes in technology. Sri Lanka being a
developing country the level of technological applications less in comparison to
developed countries. This study do not meet the requirements of a reader in view Comment [a10]: ???

point of a developed country.

6
1.8. Structure of the Dissertation

This study is related to corporate internet reporting and its impact on firm performance of
listed banks, diversified financials and insurance firms in CSE, Sri Lanka. The study is
organized into five chapters. The chapters are structured as follows:

The first chapter introduces about the CIR and its importance. It provides brief insight in to
the study. This chapter provides background of the study, research problem, research
questions and objectives of the study, significance and contribution of the study, research
methods & approaches, and limitations of the study.

The second chapter reviews the theoretical framework of the CIR and firm performance. This
part also includes the empirical evidence from previous studied related to CIR and firm
performance.

Chapter three discusses the methodology of the study. The chapter describes the research Comment [a11]: Further, this

design, the research sample and method of data collection, conceptualization,

operationalization and mode of analysis used in the study.

Chapter four includes the presentation of the data gathered by the researcher and analysis of
such data using various techniques described under methodology & testing of hypotheses.

Fifth chapter covers up findings of the study and recommendation for future study related to
the corporate internet reporting and firm performance.

1.9. Chapter Summary

This chapter describes background of the study as the entrance for the research title. Basically
it reveals the theoretical background of the study and how the relevant topic is influencing the
selected industry. And it explains the importance of understanding the research topic in Sri
Lankan context. Further the research objectives, significance of the study and limitation are
also presented. The next chapter will discuss about past literatures and theories related to the
study variables.

7
 CHAPTER TWO
LITERATURE REVIEW

2.1. Introduction

This chapter reviews how CIR affects the firm performance and emphasis to both theoretical
aspects and empirical issues. Furthermore, the section analyses the theoretical background
and previous studies conducted on the adoption of CIR practices and relationship between
CIR and firm performance which are supportive and helpful to success of this study. This
literature review includes a variety of definitions, statements, explanations and concepts too.
It also considers the main theories and empirical evidence of CIR and firm performance.

The rapid development of information, communication and technology (ICT) through the
Internet has changed the method in which a firm delivers information to their shareholders,
clients, suppliers and other customers (Bonson & Escober, 2006). Previous studies have
shown that many firms world-wide have published their financial information via the Internet
(Oyelere et al., 2003; Ali Khan, Mhammed, & Ismali, 2007). Relatively, Internet-based Comment [a12]: Ple check whether the
usage of et al is necessary or not…
reporting has also been dubbed as more influential than paper-based reporting (Debrenceny et
Comment [a13]: Please arrange it as per
al., 2002) and has turned out to be more important and interesting, thus, providing a wider alphabet order.

opportunity for deeper exploration (Jones, Xiao, & Lymer, 2002).

Thus, an increasing number of firms’ tend to use the Internet to disseminate information
voluntarily to their stakeholders to benefit from the opportunities offered by the Internet
(Kamel & Hussein, 2002). Many firms rely entirely on the Internet to publish their reports,
while others are combining online reporting with hard copy (Line, Krut, & Hawley, 2002).
Moreover, the advanced markets have experienced many collapses, which has explicated the
importance of CIR that can control performance and balance different users’ interests
(Alebrahem, 2018).

The impact of CIR on firm performance has been researched by some researchers, but their
studies have been mostly restricted to developed economies. In general terms, much of this
early work pointed to a growing adoption of the Internet as a reporting medium especially in
countries with developed capital markets, on the whole practices were less advanced in
developing countries (Ahmed, Tahat, Burton, & Dunne, 2015). A number of studies
examined the practices of CIR in developed countries such as Malaysia (Sia et al., 2016),
Egypt (Ahmed, Tahat, Burton, & Dunne, 2015; Aly, Hussainey, & Simon, 2010; Kamel &

8
Hussein, 2002), London (Pinto & Picto, 2016), New Zealand (Oyelere, Fisher, & Lasward,
2003). But in the context of Sri Lanka very limited empirical evidence exists related to CIR. Comment [a14]: ?????????
In the previous paragraph you put et al for this
The two empirical studies (Kuruppu, Oyelere, & Jabri, 2015; Sheham, 2016) have evaluated set and here you used full version……..

the use of internet as medium of voluntary communication of information by listed

companies in Sri Lanka. The findings reveal that Sri Lanka is still at a nascent stage that
provides high opportunities and challenges for stakeholder parties.

Although numerous researchers found mixed outcomes regarding the impact of CIR on firm
performance, where some concluded that there is a significant impact over the firm
performance (Sia et al., 2016), CIR has no effect on firm financial performance of French
companies (Nekhili, Hussainey, Cheffi, Chtioui, & Tchakoute-tchuigoua, 2016) , some
conclude that there is no impact over the firm performance (Alebrahem, 2018), however, it
improves firm financial performance in Taiwan (Lai, Lin, Li, & Frederick, 2010). As far as
researchers’ observation, there is a dearth of literature on this aspect in Sri Lanka, and the
level of reporting in developing countries is found to below. Therefore, it is timely and
necessary to study this phenomenon in the Sri Lankan context (Ajward & Silva, 2019).

This chapter is organised as follows: Section 2.2 presents the concept of the corporate
internet reporting Section 2.3 presents a definition of firm performance and discusses how to
measure the firm performance by using different proxies. Section 2.4 consists theoretical
review of the study Section, 2.5 presents the empirical finding about independent and
dependent variables and Section 2.6 Indicate the research gap and 2.7 ends with a chapter Comment [a15]: i

summary.

2.2. Corporate Internet Reporting (CIR)

CIR is defined as “Firms use internet technologies such as the World Wide Web to
disseminate financial information” (FASB, 2000). This is a very basic definition but CIR
can be defined as a voluntary disclosure tool that enables firms to disclose all or a proportion
of its financial and non-financial information on the internet, presented in multiple formats
and languages by using the most advanced and interactive electronic features to facilitate the
communication through and usage of the website (Arafa, 2012). Marston and Polei (2004)
state that“the internet offers firms new opportunities to supplement, replace and enhance
traditional ways of investor and stakeholder communication.”This means CIR is an
alternative method to paper-based reporting, with a number of advantages such as timeliness,

9
accessibility and transparency. Other researchers also indicate that internet-based reporting is
a “powerful tool for reaching customers, suppliers and investors of the organization”
(Ettredge, Scholz, & Richardson, 2002). Later researchers remarked websites provide
information to a wide audience. CIR is thus, on the whole, a contemporary reporting
platform.

In general, the users of CIR could be divided into two groups, such as internal users and
external users. The internal users consist of the managers, employees and shareholders. The
workforces are concerned about the firm’s future prospects since it directly affects their in-
come, whereas shareholders refer to the reporting for their decision making. Meanwhile, the
external users are banks, creditors and government. The CIR is important for them as it is the
fastest source in establishing credit ratings or solvency analysis. On the other hand,
competitors also refer to the reports to better understand the positions of their rivals and learn
how to improve their operational skills and methods (Sia et al., 2016).

There are diverse motives for firms providing information on the internet. The Steering
Committee of the Business Reporting Research Project (FASB, 2000), provides some of
these potential motives for firms to provide information on the internet:

 Elimination of the substantial cost of printing and posting of annual reports.

 Accessibility of information by a much wider audience than more conventional means
of communication permit.
 Up-to-date information through the regular maintenance of web sites.
 Reducing the time to distribute information.
 Communicating with previously unidentified consumers of information.
 Supplementing traditional disclosure practices.
 Increasing the amount and type of data disclosed.
 Improving access to potential investors for small companies.

Sia et al., (2016) said that CIR has been through three phases of implementation. First, the
rise of information systems allows firms to use the internet as the platform to disclose their
existing written financial reports. Second one, firms will change their information dissemina-
tion strategy from printed reports to the internet. The last phase is when firms prepare their
financial information and disclose it wide and fast beyond the standard information given in a
printed report. Having more information disclosed may lead to the increase of awareness

10
about their companies to the stakeholders.

11
2.3. Firm Performance

The business world will always require management to be creative in an effort to improve
their performance, they should have the ability and can take advantage of any opportunities to
improve firm performance. The firm performance as a barometer of the success of the firm
will be seen as a benchmark for investors to invest their funds (Sudiyatno, Puspitasari, &
Kartika, 2012). Performance measurement refers to the process of measuring the action’s
efficiency and effectiveness (Neely, Gregory, & Platts, 2005). Performance measurement is
the transference of the complex reality of performance in organised symbols that can be
related and relayed under the same circumstances (Lebas, 1995). In the current business
management, performance measurement is considered to be in a more critical role compared
to quantification and accounting (Koufopoulos, Argyropoulou, Zoumbos, & Motwani, 2008).

The concept of firm performance is different from the broader construct of organizational
effectiveness. According to Venkatraman and Ramanujam (1986), the broader construct
covers three overlapping concentric circles, with the largest representing organizational
effectiveness. The organizational effectiveness covers all aspects related to the functioning of
the organization. Business performance or firm performance is a subset of organizational
effectiveness that covers both operational and financial outcomes (Selvam, Gayathiri,
Vinayahamoorthy, & Kasilingam, 2016).

Firm performance is an important concept that relates to the way and manner in which
financial resources available to an organization are judiciously used to achieve the overall
corporate objective of an organization, it keeps the organization in business and creates a
greater prospect for future opportunities. Firm performance may also refer to the
development of the share price, profitability or the present valuation of a company (Melvin &
Hirt, 2005). Firm performance measured under two category. One book based measurements
and another one is market based measurement. Generally used financial measures include
return on assets (ROA), return on equity (ROE), profit margin, earnings per share, value per
employee, etc. Even though they used to be very popular, these traditional financial measures
are no longer seen as adequate means of exercising management control (Neely, 2007).
Marketing-based performance measure through the Tobin’s Q (Wolfe & Sauaia, 2003).

12
ROA is one of the most used measures of firms’ operating performance (Klapper & Love ,
2004). The value is obtained calculating the ratio of the income pertaining to a given fiscal
period and the value of the total assets employed by the company is the same period. Since
the company’s assets are under management’s control, the ROA indicates to investors the
return that managers were able to achieve relatively to the assets they had available, and so
how efficient they were in employing the firm’s resources.

ROE represents the net income of a firm as a percentage of shareholders’ equity. It shows
how much profit a company has generated relatively to the capital invested by its owners
(Gompers, Ishii, & Metrick, 2003). It is calculated dividing the net income relative to a fiscal
period by the amount of equity of the firm in the same period. Companies showing a positive
ROE are creating wealth for its shareholders, whereas a negative ROE implies shareholders’
wealth destruction. Hence, ROE is often used a proxy for firm’s performance under a
shareholder’s viewpoint and measures how effectively managers are employing the capital
that shareholders entrust to them.

Tobin’s Q index was introduced at the end of the 1960s by James Tobin and William
Brainard (1968). The index reflects the difference between the market value and the
accounting value of the firm: the discrepancies between the two (that cause the Q to fluctuate
around the value 1) are caused by the market expectations about the company and by the
unmeasured assets that contribute to the firm’s valuation but are not recorded by accountants.

2.4. Theoretical Review

Many researchers and scholars have tried to determine how best to describe what CIR and
firm performance, a firm adopts and various theories and propositions have been adopted.
CIR is attributed to different theories including the agency theory, signalling theory and
stakeholder theory (Ajward & Silva, 2019).

2.4.1. Agency Theory

Agency theory is a principle that is used to explain and resolve issues in the relationship
between business principals and their agents. Most commonly, that relationship is the one
between shareholders, as principals, and company executives, as agents (Kopp, 2019).
According to the agency theory, managers and shareholders are two different parties in a firm
and there is a conflict of interest between them because shareholders demand a higher return

13
on their investment while managers expect higher incentives or remunerations (Jencen &
Meckling, 1976).

Therefore, there is a high agency cost between agent and principal of a firm. Shareholders
(Principal) needs to monitor the management’s performance in a close and timely manner, so
mangers being provided sufficient amount of information about the business, and provide
timely information about the corporate performance in both short and long term. Most of
these tools can be effectively used by establishing informative corporate websites (Arafa,
2012). Widely spread Internet reporting successfully reduces the agency cost as a new means
of communication between managers and stakeholders of the firm (Boubaker, Nekhili, &
Lakhal, 2011). Therefore reduce the agency cost by improving the quality of financial
reporting and reducing the information asymmetry between inside managers and outside
shareholders.

2.4.2. Signalling Theory

Signalling theory describes the behaviour of two parties, one of whom (insiders) have access
to superior information compared to the other parties (outsiders), leading to an information
asymmetry problem, which is a basic condition of signalling theory (Omran & El-Galfy,
2014). Like to agency theory, the signalling theory also recognises the separation of
ownership and management and recognises that the market pressures motivate managers to
disclose information. Managers may wish to send signals to interested parties; owners,
investors, and governmental agencies in order to distinguish themselves from other
companies. In this regard disclosure is considered to be one of the means that can be used
(Das, 2015).

Signalling theory also suggests industry differences in disclosure. Firms within the same
industry tend to adopt the same level of disclosure. If a company within an industry fails to
follow the same disclosure practices, including internet disclosures, as others in the same
industry, then it may be interpreted as a signal that the company is hiding bad news (Craven
& Marston, 1999).

2.4.3. Stakeholder Theory

Stakeholder theory considers the relationship between managers and all other parties who
have a stake in the firm, such as shareholders, employees, creditors, customers, suppliers, and

14
government (Alebrahem, 2018). Stakeholder theory implies that the firm should protect the
interests of different stakeholders who have different needs. This forces the firm to balance
between these conflicted interests by disclosing more information voluntarily (Collier, 2008).
In order to satisfy the different needs of stakeholders, firms can communicate with their
stakeholders and gain competitive advantage by using the Internet as an easy and widespread
channel of information dissemination (Bolivar & Senes-Garcia, 2004).

2.5. Empirical Review

The review of literature in the concerned research area is of great importance in carrying out
further research work. The research works reviewed here have been sourced from various
journals, websites, etc. In this section a critical analysis of the most relevant research studies
regarding the CIR and firm performance. There is a considerable literature devoted to
investigate CIR in many aspects and in different countries. Many studies have discussed
theoretically and empirically the nature and extent of corporate reporting and its role,
determinants, consequences and relationship to performance of the firms.

The great increase in online reporting through web sites has not escaped the attention of
researchers and many have carried out empirical studies of corporate reporting on the
internet. Even though previously published studies have considered firms operating in both
developed and developing countries, there is still a need for empirical studies on Internet
reporting practices due to the dynamic nature of Internet reporting (Das, 2015). Related
research falls into three categories, one of which includes studies that document the use of the
Internet in a certain country. This type of research mainly gives the reader an impression of
the number of firms which provide information, how much information they give, how
effectively they use the Internet, and how firms differ from each other concerning Internet
reporting. A second category of papers study possible differences in the design and contents
of websites of firms located in different countries. They test hypotheses based on perceived
differences in capital market structures and different cultural backgrounds, among others. In
contrast to the studies in the first category, they typically select only a few criteria of Internet
usage, or aggregate them into one or a few criteria. A third category of papers identifies
differences between companies’ websites and tries to test empirically for factors which might
drive these differences (Pirchegger & Wagenhofer, 1999).

15
In reviewing the descriptive studies performed related to the concept of CIR in terms of the
extent of CIR practices adopted by firms, studies performed in different countries depicts the
variations in the level of countries adopting the improvements in the technology for the
voluntary dissemination of financial information. A study conducted by Burrus (1997) and he
found that the rapidly changing business environment is forcing companies worldwide to
develop reporting strategies that can aid to them creating competitive advantages. Compared
to the traditional printed reports, the Internet offers many more opportunities to communicate
financial information and its importance is this regard is rapidly increasing (Pirchegger &
Wagenhofer, 1999). The dissemination of financial information via the World Wide Web is
already common practice for a growing number of listed firms around the world (Lymer &
Debreceny, 2003). The Internet offers firm new opportunities to supplement, replace and
enhance traditional ways of investor and stakeholder communication.

In reviewing a decade of academic and professional research, Lymer (1999) concluded that,
as of the late 1990s, Europe lags the U.S in both the amount of data reported on the Internet
and the sophisticated utilization of Internet technology. Further, he concluded that there was a
considerable divergence of corporate usage of the Internet within and between European
countries, with the U.K being the first in the list and Spain being the last and the online filing
facility of corporate information offered by the Securities Exchange Commission (SEC) in
the mid-1990s motivated these firms to provide the information themselves on their own web
sites. Debrenceny et al., (2002) specifically focused on the importance of the disclosure
environment as a driver for CIR presentation and content. Fisher, Laswad, & Oyelere (2004)
examined the key audit implications of CIR, while Gowthorpe (2004) examined the
communication issues relating to IFR practices of smaller listed companies. Marston and
Polei (2004) surveyed the CIR practices of german companies between 2000 and 2003 and
found significant improvements in the quantity and presentation of fianncial information at
corporate websites.

Previous researches have shown that many firms world-wide have published their financial
information via the Internet (Ali Khan, Mhammed, & Ismali, 2007; Oyelere et al., 2003). The
pronounced increase in the number of companies reporting their financial report through the
Internet had a big impact on legislation, financial framework and information systems (Khan,
2006). The Internet is a convenient and efficient medium of communication for
organizations. One of the main benefits of CIR is the potential large savings in the cost of
production and distribution of financial information. The Internet allows firms to reach a

16
much wider category and variety of stakeholders at relatively lower costs, with reduction in
incidental requests from non-shareholder financial statement users (Khadaroo, 2005; Boesso
& Kumar, 2007).

A prominent study conducted by Kelton & Yang (2008) in terms of 284 firms listed in New Comment [a16]: ?????

York Stock exchange indicates that all the firms had websites and among that only 7 websites
did not possess specifically a dedicated information for investor relations, Yet it represents a
majority level complies with investor relations information. As a common practice this study
also have adopted content and presentation dimensions in building up the CIR index which
accounts to 36 items in the Index among which 24 are content attributes and rest belongs to
presentations. The findings of the study indicates that on average 16 items of the content list
14 are being by most of the firms and out of the presentation attributes majority are compiled
by the firms on an average of more than 75%.

Additional issues and challenges for CIR include possible errors in the extraction or re-
keying process, which may affect the reliability and integrity of the financial information; the
use of corporate websites for many diverse purposes, which may make the location of
financial information difficult; the acceptability of Internet financial reports as an alternative
to hard copy annual reports among users of corporate financial information; and the fact that
Generally Accepted Accounting Practice (GAAP) does not consider some of the implications
of CIR, such as the possibility that published financial disclosures can be changed with
relative ease post publishing (Lasward, Fisher, & Oyelere, 2000; Mohamed, Oyelere, & Al- Comment [a17]: ???/

Busaidi, 2009).

One of the studies that examine the association between engagement in CIR practices and
stock prices was also investigated in a study by Lai et al., (2010). The study used data from
522 companies listed on the Taiwan Stock Exchange (as of March 29, 2002). The results
showed that 490 (85.66%) of the sampled companies had websites and 206 (39.5%) of them
engaged in online reporting practices. The results revealed that share prices of companies
with online reporting responded more quickly compared with companies without online
reporting. In addition, the results suggested that companies that disclosed more information
online could expect their stock prices to respond faster than those with lower levels of online
reporting. Furthermore, the findings indicated that companies engaging in online reporting
have the potential to yield higher cumulative abnormal returns. The findings also showed that

17
the degree and scope of online reporting had a significant impact on the stock's abnormal
return.

In a similar study, Rahman (2010) examined the impact of online reporting practices on stock
prices of the Kompas 100 companies listed on the Indonesia Stock Exchange (IDX). The
study formulated three research hypotheses to test that impact; the results showed that 75% of
the sampled companies had a web presence and 25% of them engaged in online reporting
practices. Further analysis was based on the 25 companies with accessible websites and
provided corporate information online. The results supported the first hypothesis that there
was a positive association between the extent of CIR practices of the sampled companies and
the abnormal returns. In addition, the findings showed that there was no significant difference
between the abnormal return of companies with online reporting and those without.

CIR provides an opportunity for going beyond what is available in hard copy corporate
financial statements to communicate additional financial information to users, possibly on
real-time and interactive bases (FASB, 2000; Oyelere & Kuruppu, 2012). Perhaps by far the
greatest challenge faced in the CIR environment is that of ensuring the security and integrity
of the financial information published on corporate websites. Apart from possible errors in
the publishing process, materials published on the web are susceptible to all manners of
security risks (Bawanesh, 2014). There is a real risk that critical decisions could be made by
users of financial information based on inaccurate financial information gleaned from
corporate websites. The extent to which these issues are dealt with is likely to determine the
long-term usefulness of the Internet as a medium of corporate financial information
dissemination (Kuruppu et al., 2015).

Yassin (2017), studies the Jordanian public shareholding companies listed on the ASE at the
end of 2011 to evaluate the CIR practices in practice and reveals that out of the sample of 228
listed companies only 144 companies’claims to possess websites where website is the main
utility for financial disclosure through Internet and among that only 65% of the companies
disclose financial other and other related information on the Internet. Further this study has
measured CIR in terms of Content and Presentation dimensions that indicate overall
compliance with content is 69% and 97% for presentation attributes which depicts that in
terms of the quality of information provided an enhancement is required.

18
Many empirical studies on disclosure have attempted to identify the association between
disclosed information and firm performance. However, these studies vary in terms of
disclosure types and firm performance proxies. Several studies have examined the
relationship between paper-based disclosure, either mandatory or voluntary, and firm
performance (Nekhili, Hussainey, Cheffi, Chtioui, & Tchakoute-tchuigoua, 2016). However,
only a few studies have examined the impact of Internet disclosure on firm performance
(Elsayed, 2010). With respect to firm performance, many proxies have been used in the prior
studies. Although some studies use one measure for firm performance, such as market-to-
book ratio, return on assets (ROA) or Tobin's Q (Sia et al., 2016).

Aly et al., (2010), found that profitability, foreign listing and industrial type have significant
positive association with the amount and presentation formatting of information disclosed on
Egyptian companies’ web sites. But firm size, leverage, liquidity and auditor size, have non-
significant association with corporate Internet reporting.

Kuruppu et al., (2015), examined the use of the Internet as a medium for the voluntary
communication of financial information by publicly traded companies on the CSE in Sri
Lanka. The 244 companies listed on the CSE were analysed by its 20 industry sectors. The
results indicate that CIR is still at a nascent stage in Sri Lanka and there are considerable
opportunities and challenges for all stakeholder parties. While 59 percent of companies
maintain websites, only 63 of these (about 43%) use their websites to communicate financial
information. This indicates that companies in Sri Lanka do not fully garner the benefits of
engaging in IFR. However, the online annual reports of the latter IFR companies were found
to be highly accessible, with 87 percent of the websites enabling users to locate information
in three mouse clicks or less.

Sia et al., (2016), examine the impact of CIR on firm performance for a sample of 583 non-
financial listed companies in Malaysia over the year of 2013. Their finding showed that CIR
has a significant effect on firm performance. This means that more related information that is
regularly disclosed on the company’s websites can contribute more value to the firms. In
addition, in this study, the results support the resource-based view theory and the signalling
theory between corporate Internet reporting and firm value. The findings of the research
suggest that companies should disclose more information through the Internet in order to
ensure the accessibility of financial information for stakeholders, and this will present a better

19
image and reputation of the company’s best practices in financial performance. CIR will help
them to have meaningful investment decisions and persuade them to invest in the firm.

Alebrahem (2018), examine the extent of CIR, examine its relationship with corporate
governance and firm characteristics variables, and to determine the impact of CIR on firm
financial performance. The study uses a self-constructed disclosure index, which includes
196 items, to measure the CIR of 170 Saudi listed companies. The findings indicate that the
level of CIR is, on average, moderate compared to their counterparts in developed countries.
Finally, it is statistically evident that CIR has no significant impact on firm financial
performance in Saudi listed companies. These findings suggest that further effort is required
to enhance the awareness of good corporate governance and that other variables may be more
relevant to CIR in the Saudi context.

2.6. Research Gap

More number of studies already done in developed and developing countries in the area of
CIR. Although few of them are specifically examined the impact of CIR on firm performance
in both developed (Lai et al., 2010; Lazarides, Drimpetas, Argyropoulou, & Motwani, 2009)
and developing nations (Hunter & Smith, 2009; Ajward & Silva, 2019).

At the same time, in the developed countries, it is very common phenomenon that firms use
Internet to disclose all information to shareholder time to time. But in the developing
countries, this is not much developed and it is still in beginning stage. Past literatures show
significant (Sia et al., 2016); positive (Sriram & Krishnan, 2001) and no relationship
(Hansen, 2001) between CIR and firm performance.

From the above contradicting arguments about the previous findings, clearly shows that there
is a huge space to do the study again in Sri Lanka to make new contribution to the extant
literature in the area of CIR disclosure and firm performance.

2.7. Chapter Summary

The chapter discusses literature review which gives explanation about definitions of CIR and
firm performance and also what are the past researches have been done in this area. This
literature reveals the theoretical concepts related to independent and dependent variables and
next chapter will discuss about methodology.

20
 CHAPTER THREE
METHODOLOGY

3.1. Introduction

Research methodology is a set of systematic technique used in research. This simply means a
guide to research and how it is conducted. It describes and analysis methods, throws more
light on their limitations and resources, clarify their pre-suppositions and consequences,
relating their potentialities to the twilight zone at the frontiers of knowledge (Igwenagu,
2016). The previous chapter surveyed the most prominent theories of CIR and relevant
literature related with both CIR as well as firm performance. Research methodology focuses
on the research process and the kind of tools and procedures to be used. It is also defined as
the study of methods by which knowledge is gained (Rajasekar, Philominathan, &
Chinnathambi, 2013). Whereas Kumar and Phrommathed (2005) note that research
methodology is a way to systematically solve the research problem. It may be understood as a
science of studying how research is done scientifically. This study seeks to understand
relationship between the CIR and firm performance in Sri Lankan financial industry.

Conducting a research requires the development of an appropriate research approach and the
adoption of data collection techniques. The quality of the collected data determines the
quality of the findings of the research (Gill & Johnson, 2002). The use of a particular
methodology for a research depends on the scope, purpose and target population of the study
as well as the resources available to the researcher. Therefore, it is fundamental that in order
for researchers to achieve their research objectives, they have to adopt the right methodology
and select the right data collection techniques through which they can collect the required
data within their available resources (Gill & Johnson, 2002).

This chapter is organized as follows: Chapter 3 starts with introduction. Section 3.2 and 3.3
present respectively geographical and demographic profile. Section 3.4 notes an organization
profile while Section 3.5 and Section 3.6 present respectively research philosophy and
research approch. Section 3.7 presents the data collection of the research. Sections 3.8 refers
a sampling and Section 3.9 and 3.10 presents respectively conceptualization and
operationalization of the study. Section 3.12 presents the hypotheses of the study. Section
3.13 presents a data analysis and Section 3.14 ends with a chapter summary.

21
3.2. Geographical Profile

The study relies on Sri Lanka which is a country off the southern coast of the Indian
subcontinent and consists of a total area of 65,610 sq. km with 64,740 km2 of land and 870
km2 of water. Its coastline is 1,340 km long. Sri Lanka is divided into 9 provinces and 25
districts. In Sri Lanka, districts are the second-level administrative divisions, and are included in
a province. The Sri Lankan financial system consists number of intricate networks and
institutions that facilitate the flow of funds to and from the various sectors of the domestic
and global economy. As a result, the researcher seeks to highlight the impact of CIR on firm
performance in Sri Lankan financials sector.

3.3. Demographic Profile

Sri Lanka is an Island in the Indian Ocean & had a population of 22.58 million in mid-year of
2018. Sri Lanka’s rate of annual population growth is 0.73%. For 1,000 people, the birth rate
is 14.8 and the death rate is 6.3 (Index mundi, 2019). Sri Lanka is ethnically, linguistically,
and religiously diverse. As the result compare with the Sri Lankan population there are fewer
investors invest in the capital market (CSE, 2017). This study will contribute to Sri Lankan
investors to make decesion effectively.

3.4. Organizational Profile

The CSE is to contribute to the wealth of the nation by creating value through exchange
(CSE) is the organization responsible for the operation of the stock market in Sri Lanka. It is
one of the most modern exchanges in South Asia, providing a fully automated trading
platform (National News Paper, 2017). The vision of the CSE is to contribute to the wealth of
the nation by creating value through securities (National News Paper, 2017). Headquarters of
CSE have been located at the World Trade Centre (Colombo) and it also has branches in
Kandy, Jaffna, Negombo, Matara, Kurunegala, Anuradhapura and Rathnapura. The CSE has
290 firms representing 20 GICS industry groups as at 20th January 2020, with a Market
Capitalization of Rs. 2,748.10 Bn (CSE, 2020).

3.5. Research Philosophy

A research paradigm can be defined as a framework that guides how research is conducted,
based on individual philosophies, perceptions, attitudes and assumptions about the world and

22
the nature of knowledge (Collis & Hussey, 2009). The assumptions underlying each research
paradigm are important to the development of knowledge and the nature of that knowledge
(Saunders, Lewis, & Thornhill, 2009). This study takes the positivist paradigm in which the
hypotheses are developed based on the notion of the impact of the CIR on firm performance
that can be investigated and empirically examined using the researcher’s tools of analysis and
the theoretical conjectures. The nature of this study implies implementing deductive rather than
inductive approach for the following reasons (Saunders et al., 2009):

 It identifies relationship amongst variables.

 It is used to testing hypotheses rather than to building new theory.
 The independence of the researcher is maintained, as this study relies mainly on
analytical procedures rather than consideration of the experiences and opinions of
others.
 It uses quantitative data.
 Given a sufficient sample size, deductive approach allows for the generalization of
conclusions.

The research philosophy of this study is informed by the fact that the study does not seek to
produce a new theory but to test existing hypotheses based on analysis of quantitative data,
thus the deductive approach is more appropriate for this research.

3.6. Research Approach

A research approach is a plan of action that gives direction to conduct research systematically
and efficiently. There are mainly three basic approaches to research, such as quantitative,
qualitative and mixed method approach (Bryman, 2008). Quantitative approach involves the
processes of collecting, analysing, interpreting, and writing the results of a study (Kumar &
Phrommathed, 2005). Specific methods exist in both survey and experimental research that
relate to identifying a sample and population, specifying the type of design, collecting and
analysing data, presenting the results, making an interpretation, and writing the research in a
manner consistent with a survey or experimental study. Whereas Qualitative approach to
research is concerned with subjective assessment of attitudes, opinions and behaviour.
Research in such a situation is a function of researcher’s insights and impressions. (Kumar &
Phrommathed, 2005).

23
Qualitative research is concerned with individuals' descriptive accounts of their perceptions,
attitudes, beliefs, views and feelings etc. It displays how these are put together into a
framework which connects attitudes, behaviours and the discontinuities, or even
contradictions, between attitudes and behaviour (Hakim, 1997). In mixed method approach
researcher using qualitative as well as quantitative methods to analysis data. A mixed method
can also help in bridging the schism between quantitative and qualitative research
(Onwuegbuzie & Leech, 2004).

In this empirical study on the impact of CIR on firm performance of listed banks, diversified
financials and insurance firms in Sri Lanka, quantitative research approach is used, since
numerical and secondary data are used in this study.

3.7. Data Collection

There are two main types of data collection methods namely primary and secondary (Hox &
Boeije, 2005). Primary data is data that is collected by a researcher from first-hand sources,
using methods like surveys, interviews, or experiments. It is collected with the research
project in mind, directly from primary sources. The secondary data, on the other hand, are
those which have already been collected by someone else and which have already been
passed through the statistical process (Hox & Boeije, 2005).

This study is related with secondary data collection. In this study the researcher collected data
from the annual reports of the banks, diversified financials and insurance firms which are
listed in CSE. The data for the study relies over the period of 2018 to 2019.

3.8. Sample Selection

CSE has 290 firms representing 20 GICS industry groups as at 20th January 2020 as per the
scope of the study, only the listed banks, diversified financials and insurance firms were
selected for the study purpose because these firms are fully regulated firms in Sri Lanka and
also more number of investors made their investment in this industry in compare with other
indystry( so, it can be expected that more items will be disclosed by these firms via internet)
and financial firms have highest stock trading. Accordingly 68 firms selected for this study
over a period of 2018 to 2019, to identify the significant relationship between CIR and firm
performance.

24
Table:3.1 Sample Selection Criteria

Sample Selection Criteria Numbers of Firms

Firms listed in the banks, diversified financials and insurance sector 71

Firms that do not have 2018/19 annual reports (Already incorporated) (2)

Firm that incorporated in 2020/21 (1)

Firms used as sample 68

Table:3.2 Sample Selection Table

GICS Sector GICS Industry group No of firms in each sector
Diversified financials 46
Financials
Banks 12
Sector
Insurance 10
Total 68

3.9. Conceptualization of the study

The concepts and variables identified in the research problem are conceptualized for the
purpose of identifying the operational definition of the concepts. Figure 3.1 illustrates the
conceptual framework developed by the researcher for this study.

25
 Figure 3.1 Conceptual Framework

Source: Adopted from Sia, Brahmana, & Memarista, 2016

3.10. Design of the Variables: Operationalization and Measurement of
Variables

In this study, CIR is considered as an independent variable. Meanwhile, firm performance is

recognized as the dependent variable. In the CIR, CIRD index is considered as proxies for in
the study (Sia et al., 2016). There is no single measure that fully expresses firm performance.
The researcher therefore chosen two different component measures of firm performance
those are ROA and Tobin’s Q. The following table gives a clear picture regarding the
variables and measurements used in this study.

Table:3.2 Design of the variables

Key Concept Variable Measurement Indicators Cited Authors

Corporate Disclosure score to (Sia et al.,

Internet the maximum 2016; Silva &
CIRD
Reporting number of points Ajward, 2019;
Index
(Independent that is possible to Aly et al.,
Variable) obtain. 2010)

Return on Proportion of PAT

(Buallay et al.,
Assets to Total assets of the
2017)
(ROA) firm.
Firm
Performance
(Dependent (Sia et al.,
Ratio between a
Variable) 2016; Buallay
physical asset’s
Tobin’s Q et al., 2017;
market value and its
Investopedia,
replacement value
2020)

26
3.11. Definition and measurement of variables

3.11.1. Independent Variable

There is one independent variable that is CIR which is going to measure through content
analysis.

3.11.1.1. Corporate Internet Reporting

This study uses the content analysis approach to measure the CIR. Based on the empirical
studies reviewed, the researcher has developed a comprehensive Total CIR Index as a
checklist against the content analysis of attributes of CIR practices firms adopt.

As suggested by Ajward & Silva, (2019), an unweighted disclosure index was used instead of
a weighted disclosure index to avoid subjectivity. The disclosure index, based on twenty
extant studies, consisted of 105 total disclosure items, i.e., 78 content items and 27
presentation format items (see table 3.2). In scoring under the disclosure index, “1” was
awarded if a particular firm presents the required information and otherwise “0” was
awarded. Thereafter, the total score obtained for each company was divided by the maximum
possible score to calculate the disclosure index value for each firm.

Source: (Ajward & Silva, 2019)

njj = n Number of relative items applicable to company j

Xij = “1” if the item is disclosed, otherwise “0”

The index mainly comprise of two dimensions of content and presentation and under the
content dimension, six sub dimensions are identified illustrating different aspects of content
wise information provided through the Internet presence of firms and five sub dimensions are
identified to how the firms are presence their information in Internet.

27
Table 3.2: Disclosure Elements

Content Elements
Accounting and financial information
1. Current year annual reports 19. Segmental reporting by sector (revenue)
20. Summary of key ratios over a period of
2. Annual reports of past years
at least 3 years
3. Quarterly report of current year 21. Historical financial statements
4. Quarterly reports of past years 22. Summarized balance sheet
5. Semi-annual report of current year 23. Current year financial statements
6. Semi-annual report of past years 24. Semi-annual report of past years
7. Current year balance sheet 25. Current year balance sheet
8. Balance sheet of past years 26. Balance sheet of past years
9. Current year income statement 27. Current year income statement
10. Income statement of past years 28. Income statement of past years
11. Current year statement of cash flow 29. Current year statement of cash flow
12. Past years’ statements of cash flow 30. Past years’ statements of cash flow
13. Statement of changes in stockholders’
31. Segmental reporting by sector (revenue)
equity
14. Notes to financial statements of current 32. Summary of key ratios over a period of
year at least 3 years
15. Notes to financial statements of past
33. Historical financial statements
years
16. Summary of financial data over a
34. Summarized balance sheet
period of at least three years
17. Management Report/Analysis in
35. Current year financial statements
current year
18. Segmental reporting by line of
business (revenue)

Investor-related information
39. Current year resolutions of shareholders’
36. Historical share prices
meeting
37. Share price performance in relation to 40. Past year resolutions of shareholders’
stock market index meeting
38. Text of speeches and presentations
41. Chat room
(“road shows,” AGM, EGM, etc.)
42. History of dividend payment

28
Corporate governance information
43. Press releases or news
44. Auditor’s report of current year
45. Auditor’s report of past years
46. Auditor’s signature
47. Corporate governance
48. Letter from the chairman or CEO
49. Auditor’s name printed
50. GAAP basis in the year reported
51. Disclosure of risk or risk management
52. Shareholder structure
53. Code of Ethics
54. Assessments of analysts
55. Analyst forecasts
56. Top 10 stockholders in current year
57. Company’s charter in the current year
article of association
58. Names of members of BOD of the
Company
59. Profile on BOD
60. Compensation of the members of the
management board
61. Information about the directors dealing
62. Information on compensation committee
63. Information on audit committee
64. Information on nomination committee

Social responsibility disclosures

65. Environmental report or special page 67. Commercial sponsoring
66. Employee/social/safety or health 68. Non-commercial community
report/ Employee training programme involvement

General Information
73. Vision, Mission of the Company and or
69. Background or history of the
policy statements of the Company
organization
(Quality, Environment and HR)
74. Awards and accreditation received by the
70. Services or products provided
Company
71. Market share of key products 75. Industry statistics or data
72. Sales of key products

Timeliness of information
76. Current share prices 78. Monthly or weekly sale or operating data
77. Financial calendar
Presentation Elements
Contact details and other information

29
 1. Frequently asked questions
2. E-mail to investor relations or financial
control manager
3. Investor relations phone number
4. Investor relations postal address
5. English version of the web sites
6. Mailing list
7. Contact to the webmaster

Contact and information supply services

8. Link to the stock exchange web sites 10. Online investor information order service
9. Direct e-mail hyperlink to investor
11. Link to securities companies’ web sites
relations

Convenience and usability of web site-Structure

12. One click to get to investor relations or
14. One click to get to press releases or news
financial information
13. Use of frames 15. Clear boundaries for annual reports

Convenience and usability of web site-Navigation support

16. Internal search engines 19. Pull-down menu
20. Next/previous bottoms to navigate
17. Table of content/sitemap
sequentially
18. Hyperlinks inside the annual report

Technological features
21. Graphics or diagrams 26. Video files
22. Financial data in PDF format 27. Financial data in excel
23. Financial data in HTML
24. Financial data in XBRL format
25. Sound files

Source: Ajward & Silva, 2019

3.11.2. Dependent Variable

There is one dependent variable is the firm performance that is considered for this study. It is
going to be measured by ROA and Tobins’ Q.

30
3.11.2.1. Firm Performance

Following Buallay et al., (2017) the firm performance is measured using two proxies, ROA
and Tobin’s Q. The current study used return on assets (ROA) to measure operational
performance and Tobin's Q to measure market performance.

The formula of ROA based on Buallay et al., (2017) is show as follows.

The formula of Tobin’s Q based on Investopedia, 2020 is show as follows.

MVE (market value of equity) shows the closing price of a stock at the end of a period
multiplied by the number of outstanding common stocks. TA shows the book value of total
assets.

3.12. Hypotheses of the Study

The main aim of this study is to investigate the impact of CIR on the firm performance of
listed f banks, diversified financials and insurance firms in Sri Lanka. To achieve this, the Comment [a18]: ?????

conceptual framework presented above used to develop testable hypotheses for the study.
Therefore, the following hypotheses are formulated to test the relationship among the
variables of the study:

H1 : There is a significant impact of Corporate Internet Reporting on firm performance.

H1a: There is a significant impact of Corporate Internet Reporting on ROA.

H1b: There is a significant impact of Corporate Internet Reporting on Tobin’s Q.

31
H2 : There is a significant relationship between Corporate Internet Reporting and firm
performance.

H2a: There is a significant relationship between Corporate Internet Reporting and ROA.
H2b: There is a significant relationship between Corporate Internet Reporting and
Tobin’s Q.

3.13. Method of Data Analysis

There are two major types of statistics. Descriptive Statistics refers to a discipline that Comment [a19]: ???

quantitatively describes the important characteristics of the dataset. For the purpose of
describing properties, it uses measures of central tendency, i.e. mean, median, mode and the
measures of dispersion i.e. range standard deviation, quartile deviation and variance, etc. The
data is summarised by the researcher, in a useful way, with the help of numerical and
graphical tools such as charts, tables, and graphs, to represent data in an accurate way.
Moreover, the text is presented in support of the diagrams, to explain what they represent.

Descriptive statistics includes the construction of graphs, charts, and tables, and the Comment [a20]: ????

calculation of various descriptive measures such as averages, measures of variation, and

percentiles. In fact, the most part of this course deals with descriptive statistics. Inferential
statistics includes methods like point estimation, interval estimation and hypothesis testing
which are all based on probability theory.

Inferential statistics is all about generalising from the sample to the population, i.e., the
results of analysis of the sample can be deduced to the larger population, from which the
sample is taken. It is a convenient way to draw conclusions about the population when it is
not possible to query each and every member of the universe. The sample chosen is a
representative of the entire population; therefore, it should contain important features of the
population. Inferential statistics is used to determine the probability of properties of the
population on the basis of the properties of the sample, by employing probability theory. The
major inferential statistics are based on the statistical models such as analysis of variance,
chi-square test, student’s t distribution, regression analysis, etc.

32
3.11.3. Inferential Statistics

It is consists a two analysis part such as correlation and regression whereas the researcher
used to interpret his/her data with two analyses.

3.11.3.1. Correlation Analysis

Correlation is a statistical measure of magnitude and the direction of the relationship between
two variables. It is used to identify the strength or weakness of relationship between two
variables. Therefore, two variables such as independent variable and dependent variable are
taken in this study,

Independent variable – CIR

Dependent variable – Firm Performance (ROA, Tobin’s Q)

Correlation is computed in to what is known as the correlation coefficient, which ranges

between -1 and +1. The magnitude of “r” indicates the strength of the linear relationship
while the sign indicates the direction. The value of “r” close to -1 means that the linear
association is very weak and if the value close to +1 means positive correlation.

3.11.3.2. Regression Analysis

Regression analysis is a set of statistical processes for estimating the impact of variables. It
includes many techniques for modelling and analysing several variables, when the focus is on
the impact of dependent variable by one or more independent variables. It helps to understand
how the typical value of the dependent changes when any one of independent variables is
varied, while the other independent variables are constant.

Basic regression equation used for this study.

Y = a + bX

Y – Dependent Variable
X – Independent Variable
b – Slope

33
3.14. Chapter Summary

This chapter provides a clear understanding about the conceptual framework,

conceptualization of each dependent and independent variable and operationalization which
can help to evaluate the impact of CIR on firm performance proxies including ROA &
Tobin’s Q. This chapter used to interpret the data with regression and correlation analysis.
Quantitative research approach is used; since numerical and secondary data are used. The
sample consists of 68 banks, diversified financials and insurance firms which were located in
Sri Lanka which are made to find out the relationship between independent variable and the
dependent variable. The next chapter discusse about data presentation and analysis. Comment [a21]: WILL DISCUSS

34
 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS

4.1. Introduction

Data analysis is a process of inspecting, cleansing, transforming and modelling data for
discovering useful information, suggesting conclusions, and supporting decision-making
(Bihani & Patil, 2014). The analysis CIR and Firm performance relationship in Sri Lankan Comment [a22]: of CIR and firm
performance…
bank, diversified finance and insurance sector is discussed using the data from the sample.
The results from the statistical analysis discuss the integrated results to find out the
hypotheses are supported or not. Chapter mainly includes three parts such as presentation of
data, data analysis, hypotheses testing and summary. As compared to the previous chapters,
chapter four includes an extensive series of figures in order to describe the results. At first, all
the data are presented and then they are analysed by using the appropriate statistical tool like
STATA version12. The hypotheses are tested with the help of the techniques such as Comment [a23]: ple check the verison
nimber…
correlation and regression. Results obtained in this chapter are analysed to achieve the
objectives of this study.

4.2. Descriptive Statistics for the Independent and Dependent Variables Comment [a24]: ????

Descriptive statistic is are useful to make general observations about the collected data. They Comment [a25]: ????

provide simple summaries about the sample and the measures. The main purpose of the
descriptive statistic is used to summarize the data which include the mean, median,
maximum, minimum, standard deviation, skewness and kurtosis. Average value of the data is
known as mean. Middle value of data is known as median. Standard deviation is the average
variation in the data. Summary also shows the smallest value (minimum) of the data as well
as the largest value (maximum). The skewness and kurtosis explain the shape of the data
distribution. Specifically, the skewness measures the symmetry of distribution while kurtosis
measures the peakedness or flatness of the distribution (height), as compared to normal
distribution. The normal distribution takes a value of 0, and values above and below 0 denote
departures from normality. Researcher analyses how the data of CIR and firm performance
change among banks, diversified finance and insurance sector in a year. The mean (Mean),
standard deviation (Std.dev), minimum (Min), maximum (Max), skewness and kurtosis were
calculated and are reported in Table 4.1.

35
Table:4.1 Summary of Descriptive Statistics Comment [a26]: Pleas check it as whether
usage of italic format is correct or not.
STATS CED PED CIRD TOBIN’S Q ROA

MEAN 0.7733786 0.5767974 0.6582909 0.3279666 0.0256872

MIN 0.5897436 0.3703704 0.4493878 0.0181271 -0.1628079

MAX 0.8846154 0.7407407 0.8499575 2.254738 0.706706

SD 0.0761358 0.0835106 0.0888143 0.4022804 0.0956672

SKEWNESS -0.7482201 -0.5376766 -0.2463601 2.494892 5.369229

KURTOSIS 2.750834 2.749623 2.561687 10.56576 39.35592

Source: STATA output

Table:4.1 Summary of Descriptive Statistics Comment [a27]: Ple remove this picture. No
need

The table 4.1 indicates the mean, minimum, maximum, standard deviation, kurtosis and
skewness of Tobin’s q and ROA which is considered as dependent variables in this study to
measure performance of a firm and CIR like content elements (CE), presentation elements
(PE) which are independent variables to measure the Corporate Internet Reporting. The data
(68*1=68) were collected from the annual reports of the respective firms and from their
websites. Tobin’s q (TQ) has mean value 0.327 which is deviated from the standard deviation

36
(Std Dev) of 0.4022 and also it has the minimum value (Min) and maximum value (Max)
0.0181271 and 2.254738 respectively. As like as TQ, ROA has mean value 0.256872 that is
deviated from the standard deviation (Std Dev) of 0.0956672 that has minimum value (Min)
and maximum value -0.1628079 and 0.706706 respectively. In same manner CE and PE have
mean value 0.7733786 and 0.5767974 respectively which are deviate from standard deviation
(Std Dev) 0.0761358 and 0.0835106 respectively. And have minimum value (Min)
0.5897436 and 0.3703704 and have maximum value (Max) 0.8846154 and 0.7407407
respectively. Comment [a28]: First you make
interpretation and then you can show your
table as per APA.
4.3. Multicollinearity Test Comment [a29]: This interpretation is not
enough. Please do more.
Multicollinearity implies the existence of a linear relationship between two or more
explanatory variables. If there is a perfect linear relationship among the explanatory
variables, the estimates for a regression model cannot be uniquely computed.
Multicollinearity is a high degree of correlation (linear dependency) among several
independent variables. There is no formal criterion for determining the bottom line of the
tolerance value or variance inflation factor (VIF). Some argue that a tolerance value less than
.1 or VIF greater than 10 roughly indicates significant multicollinearity (Jee, 2002).

Therefore, variance inflation and tolerance factors for the independent variables were
calculated to detect multicollinearity in the models. The largest VIF was obtained for CIR
(5.29), and the smallest VIF was for the PE (3.07). Similarly, the tolerance factor varied from
a low of 0.188939 for CIR to a high of 0.326052 for the PE. The finding of this analysis
explains that there is no multicollinearity, as the highest value of the VIF is less than 10 and
the tolerance factor is below 1. Table 4.3 shows the results of the VIF and the tolerance
factors of the independent variables of the study.

Variable VIF 1/VIF

CIR 5.29 0.188939
CE 3.82 0.261811

Table 4.3: Variance Inflation factor (VIF) and Tolerance

37
 PE 3.07 0.326052

Source: STATA output

38
4.4. Correlation Analysis

Correlation indicate describing the strength of relationship between two variables. It explains Comment [a30]: ????

the dependency of multiple variables at the same period. According this study correlation
coefficient is a measure of linear association between two variables of CIR and Firm
performance. As it gives the basis of relationship among the variables, the value range is
between -1 to +1, which tells the degree of association between the variables either positive
or negative. A correlation coefficient of +1 indicates that two variables are perfectly related
in a positive linear sense, while a correlation coefficient of -1 indicates that two variables are
perfectly related in a negative linear sense. On the other hand correlation coefficient of 0
indicates that there is no linear relationship between the two variables. For simple linear
regression, the sample correlation coefficient is the square root of the coefficient of
determination. The correlation coefficient measures only the degree of linear association
between two variables.

The strength of the relationship is in accordance to Cohen, (1988) and is defined as such:

Correlation Negative Positive

None −0.09 to 0.0 0.0 to 0.09

Small −0.3 to −0.1 0.1 to 0.3

Medium −0.5 to −0.3 0.3 to 0.5

Strong −1.0 to −0.5 0.5 to 1.0

In order to test the relationships among the variables, the correlation analysis is carried out
separately for each prescribed model and the results are summarized in the following table
4.2.

Table 4.2 reports the correlations between the independent and dependent variables. There
are several significant inter correlation among the independent variable. As stated in table 4.2 Comment [a31]: >????/

There is a significant positive relationship between content element disclosure and ROA
(P<0.01). This says that, while the firm increases the content disclosures in the annual reports
and websites, it may increase firm profitability by 39%. Similarly, the relationship between

39
presentation element disclosures and ROA show positive and significant relationship at 1%
significant level (P<0.01). It explains that when the financial firms update more items for
their investors through especially via website, that increases the firm’s profitability by 31%
which is measured by ROA. The test further reveals that there is a significant and positive
association between corporate internet reporting disclosures and ROA (P<0.05). This clearly
explains that when the sample financial firms communicate up-to-date information to its
stakeholders via internet, those firms’ profitability will increase by 30% as an overall. In
addition, we can say that there is a significant and positive correlation between internet
reporting and ROA, the strength of correlation value falls between strong and weak
correlation level. Finally we say that there is no any significant relationship between
corporate internet reporting and market based performance measure such as Tobin’s Q. It
explains that especially in the developing country like Sri Lanka, the investors mostly depend
on the book based measures to make their investment choices rather than getting information
from the internet. This finding is clearly linked with previous research findings of Sita et al.,
2016 and Raw, 2017. Comment [a32]: These are not correct
names. Just I put it as examples… please
searcha dn find actual examples.
Table:4.2 Pair wise Correlation Analysis of Independent and Dependent Variables

CE PE CIR Tobin’s Q ROA

CE 1.0000

PE 0.7361 1.0000

CIR 0.8570 0.8181 1.0000

Tobin’s Q -0.0126 0.0055 -0.0194 1.0000

ROA 0.3899*** 0.3197*** 0.3079** 0.0269 1.0000

Source: STATA output
*p<0.1 significance level
**p<0.05 significance level
***p<0.01 significance level

4.5. Regression Analysis

Linear regression analysis is used to examine the impact of CIR on firm performance of bank,
diversified finance and insurance firms in CSE, Sri Lanka for the year from 2018 to 2019.

40
4.5.1. Impact of CIR on Tobin’s Q

Table 4.4 presents findings of regression analysis with information on the impact of an
independent variable on the dependent variable. In banking, diversified finance and insurance Comment [a33]: This is wrong
interpretation. Please do correct interpretation.
industry results R2 value of three performance proxies indicates that 18% of observed
variability in the CIR can be explained by the firm Tobin’s Q. The F-statistics and
significance levels (Table 4.3) show that model generates statistically insignificant outcomes.
The model is not significant at any level (P=0.9901). So, the model is rejected.

Table 4.4: Model Summary of CIR on Tobin’s q Comment [a34]: Q

Number of obs 68
F (3,64) 0.04
Prob>f 0.9901
R-squared 0.0018
Adj r-squared -0.0450
Root MSE 0.41124
Source: STATA output

Table 4.5: The relationship between the CIR and Tobin’s Q

Tobin’s Q Coef. Std.Err T P>(t) 95% conf.Interval

CED 0.0355628 1.28965 0.03 0.978 -2.540809 2.611935

PED 0.3078366 1.053586 0.29 0.771 -1.796943 2.412616

CIR -0.3507027 1.3014 -0.27 0.788 -2.950549 2.249143

Cons 0.3537682 0.5289127 0.67 0.506 -0.7028565 1.410393

Source: STATA output

4.5.2. Impact of CIR on ROA

Table 4.6 presents findings of regression analysis with information on the impact of an
independent variable (CIR) on the dependent variable (ROA). In banking, diversified finance
and insurance firms R2 value of independent variable on dependent variable indicates that
16.27% of observed variability in the ROA can be explained by the CIR. The F-statistics and
significance levels (Table 4.5) show that model generates statistically significant outcomes Comment [a35]: 4.5 or 4.6
2
(P<0.05). Further it illustrates that adjusted r value of -0.1234 and this say 12.34% Comment [a36]: - or +
Comment [a37]: s

41
percentage of influence is created by CIR on ROA. Whereas balance 87.66% impact is made
by other factors which are not depicted in this model.

Table 4.6: Model Summary of CIR on ROA

Number of obs 68
F (3,64) 4.14
Prob>f 0.0095
R-squared 0.1627
Adj r-squared 0.1234
Root MSE 0.08957
Source: STATA output
Table 4.7 displays the results of the coefficient estimation for each content elements
disclosures, presentation elements disclosures and corporate internet reporting disclosures.
Among them the disclosure index, only content elements disclosure contribute significantly
turned ROA of the sample firms. Because its p value less than 5% significant level (t=2.03).
Other variables, presentation disclosure did not show any significant contribution to the
ROA. This is evidenced with previous findings of Aly, 2010.

Table 4.7: The relationship between the CIR and ROA

Tobin’s Q Coef. Std.Err T P>(t) 95% conf.Interval

CED 0.5704655 0.2808944 2.03 0.046 0.0093144 1.131617 Comment [a38]: CED or CEDI

PED 0.1799256 0.229478 0.78 0.436 -0.2785094 0.6383607

CIR -0.225886 0.2834537 -0.80 0.428 -0.7921499 0.3403778 Comment [a39]: PLEASE CEHCK THIS
ABBREVIATION. Because in the previous
writing you used as CIRD..
Cons -0.3705806 0.1152007 -3.22 0.002 -0.6007205 -0.1404406

Source: STATA output

42
4.6. Hypotheses Testing

The conceptual framework allowed the formulation of two main hypotheses, which all
predicted a significant relationship between the dependent and independent variables.

H1 : There is a significant impact of Corporate Internet Reporting on firm performance.

H1a: There is a significant impact of Corporate Internet Reporting on ROA.

The H1a is accepted, p=0.0095 that indicates there is there is a significant relationship
between the CIR and ROA.

H1b: There is a significant impact of Corporate Internet Reporting on Tobin’s Q.

The H1b is not accepted, p=0.9901 that indicates there is no significant relationship between
the CIR and Tobin’s Q. Comment [a40]: No need to test main
hypothesis.

As our results, there is no significance relationship between CIR and Tobin’s Q. But in
developed countries found that CIR has a significant effect on Tobin’s Q at the 5% level.
This research finding is consistent with prior studies, such as Sia, Brahmana, & Memarista
(2016), Brown et al. (1995), Krishnan and Sriram (2000), and Hunter and Smith (2009).

In developed countries, more companies are using websites as an effective medium of

communication based on the fact that it is cost effective, dynamic and constantly flexible in
the global world. As a result, the Internet has become an influential medium being constantly
utilised for presenting corporate information such as financial reports. In investors of the
developed countries they fully focused on the corporate internet reporting of the firms and
have an up to date information. But in developing countries, companies are try to update their
websites and give all transparent information to shareholders. Ajward & Silva, (2019) states,
a poor level of corporate internet reporting in Sri Lanka.

In our countries’ investors mainly focused on the earning per share, market price and some of
other ratios. That’s why analysis of Sri Lankan firm’s market based firm performance
(Tobin’s Q) is not impact by the CIR. But there is a significant impact between CIR and ROA
(P=0.0095). CIR imapct the ROA with 12 %. Its is specfically depend on the content
elements discloures (P=0.046). Presentation elements not impact the ROA (P=0.436).

43
Because Investors who are in developing countires, not focused on the presentation
discloures.

Table 4.8: Summary of the Hypotheses Testing

Hypotheses Relationship between Expected

Results Outcome
No two variables Relationship

H1a CIR and ROA Significant + / - P < 0.05 Accepted

H1b CIR and Tobin’s Q Significant + / - P > 0.05 Rejected

Source: Results from the panel data analysis

4.7. Chapter Summary

In this chapter data is analysed to identify the effect of CIR on firm performance of the listed
banks, diversified financials and insurance firms in Sri Lanka and further identify the casual
relationship between the independent variable on dependent variables of this study. For
which, some statistical techniques are used such as multiple regression and correlation
analysis content elements disclosures, presentation elements disclosures, and overall
corporate internet reporting index, Tobin’s Q and ROA. The study summarizes the
descriptive statistics of the main proxies used in the analysis such as. Second, the Pairwise Comment [a41]: ???/

Correlation Analysis of independent and dependent variables is done with the help of STATA Comment [a42]: /????
Comment [a43]: Why you mix capital letters
version 12. Researcher will analyses the finding and conclusion of the impact of corporate
internet reporting on firm performance of listed banks, diversified financials and insurance
firms in CSE in Sri Lanka. Comment [a44]: ???

44
 CHAPTER FIVE
CONCLUSION AND RECOMMENDATION

5.1. Introduction

This chapter includes conclusion and recommendation of this study. The researcher has
derived conclusion from thorough analysis with the discussion of all research variables. This
present study investigates the relationship between corporate internet reporting and firm
performance of the banks, diversified financial firms, insurance firms which are listed in
CSE, by using yearly data for the period from 2018 to 2019 for 68 firms.

The structure of the chapter is organized as follows. Section 5.2 provides an answer for
research questions, Section 5.3 provides conribution of the study. Section 5.4 presents the
direction for future research and Section 5.5 discuss implications for theory and practice and
Section 5.6 end with the concluding remarks.

5.2. Answer to the Research Question

The first and second research questions articulated in Chapter One reads as follows:

Research Question 01:

RQ 01: Does corporate internet reporting influence on firm performance?

There is a significant relationship between CIR and ROA which implies that CIR decides the

ROA of these firms. That there is an insignificant relationship between CIR and Tobin’s Q in

negative sign. Therefore, it could be concluded that CIR proxies have significant role to

decide its ROA of the firms.

RQ 02: Is there any relationship between corporate internet reporting and firm performance?

There is a significant impact of Corporate Internet Reporting on ROA which is a book based
measurement of firm performance of Banks, Diversified financial firms, Insurance firms
which are listed in CSE Sri Lanka as their p values are lower than 0.05.This means increases
in Disclosures will lead to an increase in firm performance of Banks, Diversified financial

45
firms, Insurance firms which are listed in CSE Sri Lanka. But there is no significant impact of
corporate internet reporting on Tobin’s Q which is a Market based measurement of firm
performance. Therefore, it could be concluded that content elements Disclosures have a
significant impact on firm performance (ROA) of Banks, Diversified financial firms,
Insurance firms which are listed in CSE Sri Lanka. Comment [a45]: ????????

5.3. Contribution of this Study Comment [a46]: the

This study provides theoretical as well empirical evidences on corporate internet reporting
and firm performance of banks, diversified financial firms, insurance firms which are listed in
CSE Sri Lanka. Findings of the study are intended to offer valuable insights to various
parties. Prior studies focused on developed countries and very few studies done in emerging
countries. There is a lack of prior literature in Sri Lanka comprising corporate internet
reporting and firm performance. So, this study contributes to the extant literature and fills the
existence gap in the literature by providing empirical evidence regarding corporate internet
reporting and firm performance. Furthermore, it helps Sri Lanka and other emerging
countries to improve their corporate internet reporting disclosure regulations and practices.

The first beneficiaries of this study will be the corporate managers. Because they are Comment [a47]: ????

accountable to the owners of the firm. They show their accountable through the internet
reporting. This study also helps them to disseminate additional information in a timely
manner, add more flexibility, and reduce disclosure cost. The increasing use of the Internet
has created a new opportunity for firms to disseminate different types of information to their
current and potential investors via the Internet. This type of voluntary disclosure, CIR can
improve the disclosure quality and the transparency to satisfy all users’ needs. Comment [a48]: Why you repeat these
things. Because you already mentioned this
point under significance of the study.
Further this study offers national and international, individual and institutional investors
alternative investment options for maximizing their return and wealth. And they may take the
best decision for their investment. It is also useful for investors as it provides analysis
regarding value creation through corporate internet reporting disclosures that they can adopt
corporate internet reporting practices on their annual reporting and their websites. This study
can be used as a reference by regulatory bodies for further investigation on the means as to
how firms can create their market value with adoption of corporate internet reporting.

46
CIR plays major role in attracting potential investors to the firms, thus this study will enable
them to understand the importance of their role in ensuring the transparency among the
owners and minimizing the information gap that will be improving their quality of service.
The financial information disclosed via the internet is mostly up to date and is presented in
various multimedia formats, making the information easier to use in decision-making.

Moreover this study helps stakeholders to direct their efforts more effectively and also help to
suggest that firms should take the background of their shareholders into account in relation to
their corporate internet reporting strategy. Given the firms’ willingness to fulfil the needs of
stakeholders for accurate information in a timely basis, CIR demands a continuous updating
of information disclosed online.

5.4. Directions for Future Studies

Corporate internet reporting disclosure index developed in this study may not have been fully
or properly captured all aspects of corporate internet reporting practices. In this study, Comment [a49]: disclsoures

researcher could not fully consider the quality of CE disclosure, PE disclosure and Overall
CIR disclosure because banks, diversified financial firms and insurance firms disclosed their
activities quantitatively and we are not sure that firms are published pure information in their
websites.

Secondly, the study used secondary data gathered from 68 firms of banks, diversified
financial firms and insurance firms which is small in size compare with nonfinancial firms Comment [a50]: are

which are listed in CSE. While this mayn’t be large enough, not all the financial firms were
covered for some of them lacked the data. Thus, the study is limited by the number of
observations.

Thirdly, the current study uses only a few aspects of Disclosures. Further studies could Comment [a51]: ?????

consider other aspects too. This study may further be extended by choosing different
industries & more disclosures items of CIR may be included for further research.

Fourth, investors should not only pay attention to the firm performance on ROA, Tobin’s Q
measures but also look at other financial and market measures. Future studies should be taken Comment [a52]: You should say what are
those proxies
into its board those proxies for examination.

Furthermore, the findings are based on research in a single country and may not be
generalizable. Therefore, it is suggested that further research be conducted on the same topic Comment [a53]: Should be

47
with different sector or industry or different countries.

48
5.5. Implications for Theory and Practices

This study investigated the impact of corporate internet reporting on firm performance of Sri
Lankan sample firms. Therefore, the study has much implication for theory and practice.

5.5.1. Implication for theory

Findings of this study supports on agency theory, signalling theory and stakeholder theory.
Accordingly, Agency theory is a principle that is used to explain and resolve issues in the
relationship between business principals and their agents. There is a conflict of interest
between them. Shareholders (Principal) needs to monitor the management’s performance in a
close and timely manner, so mangers being provided sufficient amount of information about
the business, and provide timely information about the corporate performance. Widely spread
Internet reporting successfully reduces the agency cost as a new means of communication
between managers and stakeholders of the firm (Boubaker, Nekhili et all., 2011). Therefore
reduce the agency cost by improving the quality of financial reporting and reducing the
information asymmetry between inside managers and outside shareholders.

Like to agency theory, the signalling theory also recognises the separation of ownership and Comment [a54]: Similar

management and recognises that the market pressures motivate managers to disclose
information. Managers may wish to send signals to interested parties. In this regard
disclosure is considered to be one of the means that can be used (Das, 2015).

Stakeholder theory considers the relationship between managers and all stake holders
(Alebrahem, 2018). This forces the firm to balance between these conflicted interests by
disclosing more information voluntarily (Collier, 2008). In order to satisfy the different needs
of stakeholders, firms can communicate with their stakeholders and gain competitive
advantage by using the Internet as an easy and widespread channel of information
dissemination (Bolivar & Senes-Garcia, 2004).

Findings are supported with agency theory, signalling theory and stakeholder theory which
provide all information and disclosures to stake holders for decision making. Comment [a55]: stakeholders

49
5.5.2. Implication for Practices

This study investigated the relationship between the corporate internet reporting and firm
performance of banks, diversified financial, insurance firms which are listed in CSE. There
are so many indicators measure the firm performance, performance is the ability to generate
and sustain income, stability and growth. It is a measure of relative investment of relative
investment and can be relative to one of the following factors: assets, capital adequacy,
liquidity, liabilities, number of employees and other size measures. Investors are relay on the
firm performance for their decision making.

The findings of this study demonstrates that CIR have significant and positive impact on of
these firms which implies that the investors of these firms are strongly relying on internet
based to make their investment decisions.It is important for investors because they need more
rich and transparent information from the firms. CIR is way to deliver all information of the
firm to the stake holders on timely manner via interact. Many investors like to watch the
share price and other information of the firm, for the decision making purposes. The
corporate internet reporting disclosures boost the confidence of investors regarding their
wealth and leads them to act in the best interests of the investment by deciding them to take
useful decisions.

5.6. Concluding Remarks

This chapter includes the overall conclusion, recommendation, future research, implication
and limitation of the study regarding this research. It concluded about the relationship
between CIR and firm performance of banks, diversified financial firms and insurance
companies in Sri Lanka. Also it notes there is an impact of CIR and firm performance.

This chapter is the final chapter in the research study, every research is conducted by
researcher for find any useful findings likewise this study also has done to find the impact of
Corporate Internet Reporting on firm performance of listed banks, diversified financial, Comment [a56]: why capital letter…

insurance firms in CSE Sri Lanka. This chapter includes over all conclusion,
recommendation, future direction and implication of theory and practices. Finally the
researcher concludes that there is an impact of firm attributes on HR disclosure.

50
51
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Appendics

1. Pair wise Correlation Analysis of Independent and Dependent Variables

2. The Relationship
between the CIR and Firm performance

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3. Variance
inflation and Tolerance

4. Descriptive
Statistics for CIR and Firm performance

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