The Value Relevance of Financial Instruments Disclosure in Malaysian Firms Listed in the Main Board of Bursa Malaysia

This paper investigates the value relevance of financial instruments disclosure in Malaysia based on SB24 (Financial Instruments: Disclosure and Presentation) standard. Unlike most of the Western countries, the only standard available for firms in Malaysia related to financial instruments is MASB24. Therefore, in the absence of a standard on the measurement of financial instruments, it is important to know whether the disclosure of such risky activities is useful to the investors or the market. Hence, this study examines the association between i) disclosure quality of financial instruments information and ii) fair value information and the market price of firms. Disclosure quality is measured based on disclosure index developed according to the MASB24 disclosure requirements. Results indicate that disclosure quality of financial instruments information is value relevant. However, the relationship is less positive in the period after the MASB24 become mandatory. Further evidence suggests the less positive relationship is not caused by bad news but is caused by the disclosure quality of risks. Consistent with prior studies, this study also provides evidence that fair value information is value relevant. This indicates that investors value the fair value information and high disclosure quality as important factors in investment decision. These findings imply the adoption of FRS 139 Financial Instruments: Recognition and Measurement in Malaysia is justified