Property Management

Transparency in Malaysian property companies

Muhammad Najib Razali Yasmin Mohd Adnan

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Property Management, Vol. 30 Iss 5 pp. 398 - 415
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Transparency in Malaysian
property companies

398

Department of Real Estate Management, Universiti Teknologi Malaysia,

Johor, Malaysia, and

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Muhammad Najib Razali

Received November 2011
Revised March 2012
Accepted April 2012

Yasmin Mohd Adnan

Department of Estate Management, Universiti Malaya, Kuala Lumpur,
Malaysia
Abstract
Purpose This purpose of this paper is to investigate the current level of transparency based on the
customised transparency matrix (TM) amongst the top listed property companies in Malaysia, based
on capital market value. Furthermore, this paper discusses the concept of transparency from the
perspective of Malaysian property markets.
Design/methodology/approach Data for this research were collected from the top 30 property
companies in Malaysia through their annual reports and corporate websites. The indicator of
transparency was developed based on various literature surveys and other research findings. Using
the developed indicators, the study analysed the transparency attributes from TM of the top 30 listed
property companies in Malaysia.
Findings In terms of transparency levels and widely implemented transparency elements, the
findings revealed that Malaysian property companies were within a good level range.
Research limitations The research is based on a study of the top 30 listed property companies in
Malaysia based on market capital values as at 30th June 2010.
Originality/value This paper examines the transparency level of property companies in Malaysia
based on each companys current annual report. The findings provide some insights and guidelines for
the industry as well as academics on the transparency level particularly in Malaysian property
business.
Keywords Malaysia, Property companies, Transparency, Property, Capital markets
Paper type Research paper

Property Management
Vol. 30 No. 5, 2012
pp. 398-415
r Emerald Group Publishing Limited
0263-7472
DOI 10.1108/02637471211273383

Introduction
The transparency concept in Malaysia is not a relatively new concept though it is not
widely practiced in every company. In the real estate industry, it is believed that the
transparency concept can attract more professionals and investors in the property
market. With the onset of the globalisation process, the transparency concept has
become more significant in the property market due to the demand from international
investors. However, the term transparency is not an expression that is clearly defined
in real estate literature (Schulte et al., 2005).
Institutional investors have been increasing their interest in real estate and have
started using publicly listed real estate as a cost-efficient, more liquid alternative for
their direct real estate holdings (Brounen et al., 2007). From the perspective of economic
and key performance indicators, Malaysia has shown strong growth in 2010 though hit
by the global economic crisis (see Table I). Hence, it sees Malaysia as being on the radar
for property fund managers.
The significance of the property market in Malaysia can be seen from the listed
property securities market in Malaysia over the period 2008-2010 as evident in Table II.
Market capitalisation in Malaysia increased significantly from USD9 billion in 2009 to

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2010
GDP (billion)
GDP growth
GDP-PPP (billion)
Population
GDPsectors
Agriculture
Industry
Services
Labour force (million)
Unemployment
Household income
Lowest 10 per cent
Highest 10 per cent
Investment (gross fixed)
Inflation rate
Property transaction volume (billion)
Business competitiveness index
Corruption perception index
World competitiveness index
Economic performance
Government efficiency
Business efficiency
Infrastructure
Overall
Real estate transparency index
Financial stability

USD383 billion
7.2%
14,700
28.7 million
9.4%
40.9%
49.7%
11.4
3.5%

399

2.6%
28.5% of GDP
20.1% of GDP
2.2%
2.8
No. 24
No. 56
No. 42
No. 42
No. 25
No. 30
No. 26
No. 25
No. 3

Sources: Authors compilation from WEF (2011), RCA (2011), Transparency International (2011), CIA
(2011), JLL (2010), Worldbank (2011) and Bank Negara (2011)

2008
2009
2010

Malaysian
property
companies

Number of property companies

Market capitalisation (USD billion)

84
82
83

9
11
23

Source: Authors calculation from Real Capital Analytics (RCA) (2009, 2010, 2011)

USD23 billion in 2010. Improvement in GDP growth and the stabilisation of the credit
markets shores up investors confidence. Market fundamentals were weak in 2008 and
2009, but it was a range of capital market factors that led the recovery. In this respect,
investors are currently looking for good corporate governance within companies in
specific markets in a particular country. Although company performance is a main
indicator in investment decisions, market and company information are also essential
for the decision-making strategy for investors.
Based on an earlier study of the market capitalisation of the Asian stock market, the
listed property companies made a significant contribution (Newell and Chau, 1996).
Moreover according to Bond et al. (2003), international diversification is shown to be
more effective in the Asian property markets rather than the European property

Table I.
Economic and
financial profile
of Malaysia in
2009/2010

Table II.
Significance of listed
property securities
market in Malaysia:
2008-2010

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400

markets. There has been increasing interest in real estate by institutional investors
and they have started using publicly listed real estate as a cost-efficient, more liquid
alternative for their direct real estate holdings (Brounen et al, 2007).
Literature review
Very little study focuses on the property transparency market. For example Schulte
et al. (2005) examined transparency in the German market while Newell et al. (2005)
attempted to investigate the impact of information transparency in the Asian property
companies. Other researchers investigated transparency in property with attention
given to real estate investment (e.g. Eichholtz et al., 2009), REITs (e.g. Capozza and
Seguin, 1999), private equity funds (Linneman, 2002) and transparency in the
European non-listed real estate funds market (Brounen et al., 2007).
In general, these researches focused on transparency and market/companies
performance. As such, very limited studies had focused on the content and information
that is available on web sites and annual reports of companies. The internet is
a powerful tool for companies to demonstrate transparency levels within their
organisation. Malaysia is categorised as having a transparent real estate market
based on the report by Jones Lang LaSalle ( JLL) (2010). Consequently, when property
companies realised the importance of transparency, the real estate market became
more mature. This also reflects the market maturity of companies in Malaysia from
which Chin et al. (2006) has highlighted the principal characteristics on market
maturity. It then reflects the performance of a property market based on several factors
such as:
.

accommodation of a full range of use and investment objectives;

flexible market adjustment in both the short term and long term;

existence of a sophisticated property profession with its associated institutions

and networks;

extensive information flows and research activity;

market openness in spatial, functional and sectoral terms; and

standardisation of property rights and market practices.

The issue of transparency in the property market has caused differences of opinion
among property players. Analysts have been keen to emphasise the importance of
transparency in countrys property markets in which scale is a main indicator for
investors to invest. Transparency in the property market will represent corporate
focus, corporate management, stability, allocation efficiency and market performance.
Only transparent markets can create confidence and be attractive to professional
investors (Schulte et al., 2005).
Transparencies in Asian countries have shown some improvement over the past
years. Countries such as Singapore, Hong Kong and Malaysia were categorised under
the transparent market ( JLL, 2010). The Asia Pacific region has shown the most
broadly based improvements in terms of transparency over the past two years ( JLL,
2010). This is a reflection that property companies in Asia including Malaysia have
shown a good transparency level. Table III presents the global real estate transparency
index (RETI) by JLL.
The liberalisation of the capital markets in many countries has increased the
economic and political pressure to create financial instruments that are acceptable to

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Highly transparent
Australia
New Zealand
Ireland
Germany
Transparent
Finland
Singapore
Portugal
Poland
Malaysia
Israel
Semi-transparent
Greece
Romania
Turkey
Thailand
Low transparent
Oman
Egypt
China
Kuwait
Opaque
Syria

Canada
Sweden
France
Belgium

UK
USA
Netherlands
Denmark

Spain
Norway
Switzerland
South Africa
Japan

Austria
Hong Kong
Italy
Czech Republic
Hungary

Slovakia
Taiwan
Dubai
Bulgaria

Russia
Chile
Brazil
India

Morocco
Saudi Arabia
Lebanon
Uruguay

Croatia
Qatar
Panama
Kazakhstan

Sudan

Algeria

Source: JLL (2010)

foreign investors (Eichholtz et al., 2009). Investors always seek to find better
opportunities for their investment. The reason to invest in certain countries depends on
various factors. Transparency level is considered as one of the important factors.
Eichholtz et al. (2009) found that foreigners may be at a disadvantage particularly in
countries with an unfavourable political environment, an opaque real estate market
and a low level of economic integration.
The availability of real estate market reports has increased significantly over the
last ten years (Schulte et al., 2005). As such, property companies in particular are
legally required to publish annual reports, disclosing a range of facts and figures as a
regular requirement (Newell et al., 2005). In Malaysia, the number of listed property
companies which published annual reports has significantly increased due to the
requirement by the Malaysian Securities Commission to reveal their companys
performance to the public. According to the Malaysian code of corporate governance
(Securities Commission, 2007), companies are required by the listing requirements of
Bursa Malaysia to include their narrative statements, and have applied the relevant
principles in their annual report. In addition, in order to comply with the regulations,
companies must state in the annual report their best practice of corporate governance.
In comparison with the early 1990s, only a few companies published their market
report, which coincided with the early stage of internet usage during that time. Today,
with the rapid development of the internet, many companies list their annual report
on their web sites and have a link to the Securities Commission web site for the public
to access.
In order to achieve a high transparency level such as the likes of Singapore, US, UK
and Australia, Malaysia must achieve high ratings for three attributes as indicators

Malaysian
property
companies
401

Table III.
Global real estate
transparency index: 2010

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402

under the element of transparency which constitutes world class companies, web site
transparency, and a healthy and good environment for a for business, investment
and dwelling. In terms of real estate, this can be related to the transparency concept.
The concept of transparency will lead to certain characteristics as follows:
.

the rental market, e.g. average and top rents, lease rents, demand and supply
space;

the investment market, e.g. property and rents and yield; purchase and selling
prices;

the property and construction market, e.g. building costs; and

the capital markets, e.g. lending constructions (Schulte et al., 2005).

The JLL transparency index is based on five major categories which are:
(1)

performance measurement;

(2)

market fundamentals;

(3)

listed vehicles;

(4)

regulatory and legal environment; and

(5)

transaction process ( JLL, 2010).

The above methodology is highly dependent on a questionnaire disseminated among

senior JLL investment management personnel, working in each country in order to
construct composite transparency indexes. JLL has been constructing this index since
1999. JLLs survey has not taken into account companies levels of transparency from
the physical evidence such as annual reports and corporate web sites. As such, this
research attempts to explore transparency levels from the property companies point of
view with a consideration of the Malaysian real estate market environment. Although
a similar theme of study of related topics have been carried out by JLL and other
researchers, this study is among the first to analyse companies physical evidence,
annual reports and corporate web sites as a function of information transparency
using desk research methods.
In terms of economic sciences, transparency refers to information equivalency
which means markets provide as much information as possible (Schulte et al., 2005). The
globalisation process in the world makes transparency become more essential as
investors seek to find international diversification. In addition, transparency will decrease
the volatility level of property markets by creating positive synergy in the industry.
Moreover, a transparent industry will accelerate cross-border investments from the
positive impact on the market as a result of high confidence among investors.
Transparency in real estate is difficult to achieve as the property market is highly
correlated with the local and global economic situation. As such, it is important to
assess the local market situation as it is critical to investors. With regards to the
implications of information available in the market and creating a transparent
environment in the Malaysian property market, specifically in listed property
companies, this research attempts to investigate current levels of transparency among
the top property companies in Malaysia. Easy access to property companies
information reflects the maturity of the real estate market.
In addition, this information will provide a better overview to investors for their
decision-making process. The importance of this increased information transparency

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by listed property companies is widely acknowledged (Brounen et al., 2011). The

results of transparency levels will then be compared to the ranking of the top 30
property companies in Malaysia. Information transparency is important for larger
companies as investing in larger companies makes for a better strategy in investment
decision making.

Malaysian
property
companies

Research methodology
This paper examines a unique sample using the content analysis approach of selected
listed property companies web sites taken from the Malaysian Stock Exchange (Bursa
Malaysia). Only the top 30 companies were selected for this survey based on market
value as of June 2010 (see Table III). It has been said that investing in public listed
shares of these real estate investment vehicles has recently become increasingly
popular (Boer et al., 2005). These public listed companies are required to publish their
own annual reports. Apart from annual reports, companies web sites can also be
a major tool for the transparency benchmark.
Using a similar research methodology by Brounen et al. (2007) and Newell et al.
(2005) on the European and Asian markets, respectively, the attributes used to assess
information transparency was modified by taking into account the local environment
of property business in Malaysia. The customised matrixes also exploit the RETI,
published by JLL, which is based on five key indices. The element of the indices was
then modified to suit the local market. The transparency matrixes (TM) reflect the
average transparency level for each local property companies.
Corporate web site transparency has 12 criteria covering the availability of an
English web site, accessibility, the clarity of the information contents, whether
it is updated regularly, and whether the site includes information such as annual
reports, property information, investment information, news, stock information
and product information. A 24-point criteria covering transparency within an annual
report covers items such as company management, financial reports, cash flow
statements, risk analysis, market segmentation, shareholders information, future
investment plans and dividend policies. Annual reports have been the traditional
means for a company to disclose comprehensive and detailed information regarding
the companys current performance. However, how far a company will disclose their
information, based on the information symmetry attributes, is the basis of various
literature reviews.
It is noted that while varying levels of information is available, many property
companies currently provide significant information than what is minimally required.
This is made through the provision of an enhanced accessible investor relations service
to ensure investors are informed of their investment decisions, and their selected
property companys operation is seen to be transparent and with the necessary
investors information available (Newell et al., 2005). As mentioned by Schulte et al.
(2005), transparent markets provide as much information as possible for all market
participants and therefore minimise the information advantages of other market
participants.
The study used the data collected based on visible information from the companies
web sites and annual reports. In addition, a list of attributes pertaining to
transparency, referred to as transparency information matrix, was developed. Each
attribute was then reviewed and a score was given to develop an index. The approach
of this research is to investigate each and every selected companys web site, a
method which constitutes a desk research. According to South Coast Information and

403

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404

Library Services (SCILS), University Bournemouth (1995), desk research refers to the
identification and analysis of information that has already been compiled and
published in some form or another. In addition, this type of information is known as
secondary as it already exists. For this study, two matrixes were developed in order
to assess the transparency level among top listed property companies in Malaysia.
The first matrix takes into account the transparency characteristics from the
evidence of companies web sites. The second matrix is based on companies annual
reports. The details of the TM for this study are tabulated in Table V. The rank
correlation between the top 30 companies ranking and transparency index ranking
was analysed using Spearmans coefficient. The following formula was used
to calculate the coefficient between these variables, rs 16Sd2/n(n21) where sd2
is the sum of the squared differences between the top 30 property companies in
Malaysia and the top 30 transparency property companies index, while n is
the number of these two variables. The rank correlation was used to identify
the relationship between the top 30 companies and the transparency index. This
relationship shows whether the top companies are ranked well in terms of
transparency (Table IV).
Company

Table IV.
Top listed property
companies in
Malaysia (as of
June 2010)

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

SP Setia
IJM Land
Glomac
Paramount
Hunza Properties
Guocoland (Malaysia)
Crescendo
Dijaya
Sunway City
Encorp Berhad
Hua Yang
KLCC Property Holdings
TAHPS Group
Sunrise
Damansara Realty
Mah Sing Group
Bandar Raya Developments
Oriental Interest
KSL Holdings
Bolton
Metro Kajang
Eastern & Oriental
Country Heights Holdings
Plenitude
IGB
Mutiara Goodyear Development
Selangor Properties
KRIS Assets Holdings
Daiman Development
SHL Consolidated

Source: Authors calculation from Datastream (2010)

Market value (USD billion)

1.05
0.89
0.87
0.83
0.76
0.70
0.66
0.64
0.48
0.48
0.42
0.41
0.40
0.38
0.36
0.33
0.31
0.28
0.27
0.27
0.26
0.26
0.17
0.25
0.23
0.23
0.21
0.20
0.19
0.19

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Results and discussions

A matrix table was used to assess the transparency level among top property
companies in Malaysia (Table V). Tables VI and VII presents the score for each
company and the transparency attributes for the two matrixes. The results also
demonstrate the attributes score that revealed which common transparency attributes
are being practised among the property companies in Malaysia. Furthermore, each of
the attributes was also examined to provide a clear idea of the transparency index.
As mentioned above, these attributes provide an overview of factors that are believed
to be the transparency indicator for property companies in Malaysia. Obviously, there
will be some other elements which relate to transparency that needs considering but
these attributes are identified as pillars based on various literature reviews.
The horizontal line indicates the overall score for each company by each attribute.
In additional to the score, a vertical line shows the score for each attribute for each
company. The results indicate large property companies in Malaysia such as SP Setia,
Dijaya and Paramount, were among the highest level and achieved almost full
scores for both matrixes. Consequently, this signifies that these companies are the
most transparent property companies in Malaysia. It could be observed that some
companies obtained the same score and as such share the same rank. Out of 30
companies 26 were able to achieve a score of more than half of the attributes in terms of
corporate web sites. For annual reports, all companies managed to achieve more than
a half score of the attributes.
The average score for property companies in matrix 1 and matrix 2 is 10 and 14,
respectively. This indicates that the majority of the listed property companies in
Malaysia have almost all attributes in the TM. The results also indicate that there is
room for improvement in order to enhance transparency elements in the companies
corporate web sites. Compared to annual reports, more transparency elements need to
be achieved. The results also correlate with the earlier transparency report by JLL that
has placed Malaysia under the transparency market level for property ( JLL, 2010).
Interestingly, three companies, namely: KRIS Asset Holdings, Mutiara Goodyear

Matrix 1: Corporate web site

Language
Easy access
Documents
Contact details
collection
Property
Annual report
information
Link to other
Corporate social
related web sites responsibility activities
Matrix 2: Annual reports
Year published
Financial report
Cash flow
statement
Competitors
Companies
liabilities
Risk analysis
Audit committee

Update
Financial calendar

Companies news
Investment information

Stock performance
information
Customer value and
satisfaction section

Corporate organisation

405

Price and quality comparison

Mission statement

Shareholder
information
Balance statement

Risk analysis
Companies investment

Future investment plan Ownership structure

Market segmentation
Competitors

Future investment plan Ownership structure

Related party
Shareholders by type
transactions
and classes

Malaysian
property
companies

Income statement
Dividend policy

Accounting policy
Remuneration and
performance pay for directors

Table V.
Transparency
matrixes (TM)

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13 10 7 10 6 11 8 12 8 10 10 13 10 6 10 12 6 10 9 12 12 10 12 8 13 11 9 11 9 10

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30
30
21
24
25
29
4
4
28
27
12
28
8
12
16
0

Notes: Each number represents the company: 1. SP Setia; 2. KLCC Property Holdings; 3. Selangor Properties; 4. TAHPS Group; 5. KRIS Asset Holdings;
6. Sunway City; 7. Plenitude; 8. Paramount; 9. IGB; 10. Sunrise; 11. Damansara Realty; 12. IJM Land; 13. Mah Sing Group; 14. Daiman Development; 15. Bandar
Raya Development; 16. Hunza Properties; 17. SHL Consolidated; 18. Oriental Interest; 19. Metro Kajang; 20. Guocoland; 21. Crescendo; 22. KSL Holdings;
23. Dijaya; 24. Mutiara Development; 25. Glomac; 26. Encorp Berhad; 27. Eastern & Oriental; 28. Hua Yang; 29. Country Heights; 30. Bolton

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1. Language
2. Easy access
3. Update
4. Companies news
5. Documents collection
6. Contact details
7. Financial calendar
8. Investment information
9. Property information
10. Annual report
11. Stock performance information
12. Corporate organisation
13. Link to other related web site
14. Corporate social responsibility section
15. Customer value and satisfaction section
16. Price and quality comparison
Total

Table VI.
Transparency
matrix 1 (corporate
web site) findings
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Total

406

Companiesa

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27
26
0
27
27
6
27
26
25
26
24
0
27
1
21
27
27
26
0
25

Notes: aEach number represents the company: 1. SP Setia; 2. KLCC Property Holdings; 3. Selangor Properties; 4. TAHPS Group; 5. KRIS Asset Holdings;
6. Sunway City; 7. Plenitude; 8. Paramount; 9. IGB; 10. Sunrise; 11. Damansara Realty; 12. IJM Land; 13. Mah Sing Group; 14. Daiman Development; 15. Bandar
Raya Development; 16. Hunza Properties; 17. SHL Consolidated; 18. Oriental Interest; 19. Metro Kajang; 20. Guocoland; 21. Crescendo; 22. KSL Holdings;
23. Dijaya; 24. Mutiara Development; 25. Glomac; 26. Encorp Berhad; 27. Eastern & Oriental; 28. Hua Yang; 29. Country Heights; 30. Bolton

15 0 0 14 11 16 15 16 15 16 14 15 15 12 15 15 15 15 14 13 15 15 16 0 14 15 15 14 15 16

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1. Year published
2. Financial report
3. Shareholder information
4. Income statement
5. Cash flow statement
6. Mission statement
7. Balance statement
8. Dividend policy
9. Companies liabilities
10. Companies investment
11. Market segmentation
12. Competitors
13. Risk analysis
14. Future investment plan
15. Ownership structure
16. Accounting policy
17. Audit committee
18. Related party transactions
19. Shareholders by type and classes
20. Remuneration and performance pay for directors
Total

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Companiesa

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Malaysian
property
companies
407

Table VII.
Transparency matrix 2
(annual report) findings

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408

Development and KLCC Property Holdings have no transparency elements for annual
reports. While Selangor Properties has minimal transparency attributes (below
average score).
By comparing matrix 1 and matrix 2, it appears that most of the companies
obtained the same score in matrix 2 which was assessed on annual reports. This
indicates that these companies share similar attributes of transparency elements in
annual reports. It can be concluded that the majority of the top property companies in
Malaysia have put their transparency indicator through the annual reports compared
to their corporate web sites. On average, property companies in Malaysia have
positioned themselves to number 12 (corporate web sites) and 7 (annual reports).
Transparency and accountability strategies among property companies can be
catalysts for sustainable development in Malaysia. Stronger corporate governance will
deliver higher shareholder returns (Chi, 2009). Beeks and Brown (2006) highlighted
that firms with more effective corporate governance make better information
disclosures. In addition, institutional investors have started using publicly listed real
estate and cost-efficient, more liquid alternatives for their direct real estate holdings
(Brounen et al., 2007). In this regard, property companies with better corporate
governance and high levels of transparency will help Malaysia to achieve sustainable
development in the long term. With USD23 billion worth of property transactions
in 2010, a securitised property market contributes significantly to the Malaysian
economic growth.
In many OECD countries including Malaysia, financial reports must be based on
New Public Management standards. This standard requires financial information that
is more comparable, relevant and useful for decision making. Annual reports have been
a traditional means for companies to communicate with investors and analysts; as
such it is very important to disclose comprehensive details regarding performance,
current values and companies plans and objectives. Therefore, the findings above
describe the current situation in terms of comparable, relevant and useful data
which relates to transparency elements. Moreover, transparency could improve the
intelligibility and comparability of companies financial statements. The findings show
that most of the property companies were able to achieve a good score in the annual
report matrix.
Consequently, it will enhance the success of the Malaysian Governments
Economic Transformation Plan (ETP) which states that one of the objectives is to
be a transparent government. Furthermore, it is important to assess the impact of
property company management strategies on enhancing investment appeal and
creating shareholder value for the listed property companies (Newell et al., 2005). With
numerous scandals on reporting and auditing in corporate companies, transparency
and disclosure practices are important components and a leading indicator of quality
corporate governance (Aksu and Kosedag, 2006).
Some of the big companies such as SP Setia, IJM, Glomac, Dijaya and Paramount,
scored among the highest for transparency attributes. This reflects their effort to
promote integrity of their companies. Hence it will also promote the integrity of
the securities market. The Malaysia Government introduced several regulations
to continue the process of upgrading information disclosure and corporate governance
standards.
The development of the two matrixes of the transparency index took into account
earlier identified attributes which were modified by considering the local environment
of property business in Malaysia. As such, the attributes that have been identified were

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also examined to provide an overview of factors that are critical for driving
transparency in property companies in Malaysia. For matrix 1 (corporate web sites),
attributes such as language and easy access indicated 100 per cent usage in terms of
transparency attributes.
On the other hand for matrix 2 (annual reports), none of the attributes acquired a
100 per cent score by top property companies in Malaysia. Other attributes such as
contact details, corporate organisation and property information were among the
popular attributes in matrix 1 used by property companies in Malaysia which indicates
a percentage above 90 per cent. While in matrix 2, income statements, cash flow
statements, year published and risk analysis were among the attributes that gathered
the highest percentage. Some unpopular transparency attributes such as price and
quality information (matrix 1), shareholder information, competitors and shareholder
by type and classes (matrix 2) received a score of zero. This indicates that property
companies in Malaysia were not yet ready to reveal all the required information.
Interestingly, some common transparency elements such as financial calendars and
investment information for matrix 1 obtained a low percentage (13.3 per cent) which
indicates only a few companies provided this information. Similarly in terms of annual
reports (matrix 2) elements such as mission statements also obtained a low percentage
(20 per cent). The average percentages for both matrixes are 62.1 and 65.8 per cent,
respectively. The percentages above 50 per cent specify that most of the transparency
attributes are being implemented whether in the form of corporate web sites or annual
reports.
Overall the results revealed that the annual report is still the most common
and widespread strategy for companies to disseminate and disclose information.
Attributes such as year published, income statements, cash flow statements, risk
analysis and related party transactions were among the popular elements. Corporate
web sites have the least attention in terms of transparency from Malaysian property
companies; whilst attributes such as web sites in English, easy access, annual reports
and links to other related web sites were among the popular elements.
Table VIII presents the full score and percentage of TM among the top property
companies surveyed. The full score is worked out from the score of both
matrixes (company web site and annual report) which examined the companys
corporate web sites and annual reports. SP Setia is the most transparent company
in Malaysia with the highest score of TM. Three companies share the highest same
score and therefore share the same rank. Dijaya, Paramount and IJM Land had
78 per cent of the major attributes score for TM. Thus, these three companies are
ranked at second place in terms of the transparency index among top property
companies in Malaysia.
Another four companies, namely, Crescendo, Sunway City, Hunza Properties and
Glomac follow closely with 75 per cent of the transparency attributes score. Moreover,
three other property companies, namely, Encorp Berhad, Bolton and Sunrise also
obtained a close percentage score (72 per cent) with other top score property companies
in the TM.
This indicates that the top ten property companies in the transparency index have
almost all the transparency attributes. On average, property companies in Malaysia
obtained 64.4 per cent or a score of 23 out of a possible 37. Therefore, this indicates that
most of the companies managed to have more than half of the transparency attributes
index. Consequently it leaves the transparency level among the property companies in
Malaysia at an acceptable level. It is also noted that overall nine companies scored

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410

Table VIII.
Property companies
ranking of transparency
matrixes

Ranking Company
1
2
2
2
5
5
5
5
9
9
9
12
12
12
12
12
12
12
19
19
19
22
22
22
25
26
27
28
29
30

SP Setia
Dijaya
Paramount
IJM Land
Crescendo
Sunway City
Hunza Properties
Glomac
Encorp Berhad
Bolton
Sunrise
Guocoland
Mah Sing Group
TAHPS Group
Oriental Interest
Hua Yang
KSL Holdings
Bandar Raya Developments
Damansara Realty
Eastern & Oriental
Country Heights Holdings
Metro Kajang
IGB
Plenitude
SHL Consolidated
Daiman Development
KRIS Assets Holdings
KLCC Property Holdings
Mutiara Goodyear Development
Selangor Properties

Matrix 1 (/16) Matrix 2 (/20) Total (/36) Percentage

13
12
12
13
12
11
12
13
11
10
10
12
10
10
10
11
10
10
10
9
9
9
8
8
5
6
6
10
8
7

16
16
16
15
15
16
15
14
15
16
16
13
15
15
15
14
15
15
14
15
15
14
15
15
15
12
11
0
0
0

29
28
28
28
27
27
27
27
26
26
26
25
25
25
25
25
25
25
24
24
24
23
23
23
20
18
17
10
8
7

80.56
77.78
77.78
77.78
75.00
75.00
75.00
75.00
72.22
72.22
72.22
69.44
69.44
69.44
69.44
69.44
69.44
69.44
66.67
66.67
66.67
63.89
63.89
63.89
55.56
50.00
47.22
27.78
22.22
19.44

a below average ranking, ranging between 19.4 and 63.9 per cent. It indicates that these
companies have less transparency attributes compared to their rivals.
The increase in international real estate capital flows could foster increasing
demand for stronger institutions across global real estate markets (Eichholtz et al.,
2009). The transparency index surveyed by JLL revealed that real estate transparency
around the world continues to improve. Previous evidence by Eichholtz et al. (2001)
revealed that internationally diversified property companies underperform local
property companies. Hence its reduction of the information disadvantages could imply
that international property companies have improved their performance relative to
property companies locally. Based on this situation, it is crucial for Malaysian property
companies to increase their level of transparency. Property companies are able to
achieve a satisfactory level in terms of transparency levels. Hence, it indicates the
potential of diversification for Malaysian property companies.
Historically, Malaysia had a poor culture of transparency. Real estate makes up
almost two-thirds of the nations wealth. As such transparency plays a crucial role
affecting business and investments in real estate which will be the utmost important
driving force of the countrys competitiveness, both presently and continuously in the
future. Good corporation structures represent relationships within an organisation
effectively. Transparency creates ways and means to communicate, and provides

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companies
411

30
Glomac
IJM Land

Plenitude

Hunza Properties

25
BandarRaya
Developments
Sunway City

20
Transparency

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information in multiple formats to accommodate the diversified needs of investors and

stakeholders.
Figure 1 represent the relationship between the overall top 30 property companies
index in Malaysia and the transparency index ranking based on the analysis
illustrated in the previous section. This test is to analyse whether top companies also
have a high level of transparency index. Using Spearmans coefficient of rank
correlation between the two indexes, Rs 0.06 thus indicates that the transparency
index and top 30 property companies in Malaysia is not significantly correlated. The
fact that the top companies must have a high level of transparency is not necessarily
true. From the graph, it shows a weak relationship between the transparency indexes
and the top 30 property companies in Malaysia. This figure highlights an important
finding; highlighting the fact that although most of the companies in Malaysia have a
satisfied level in terms of transparency attributes, the top property companies (based
on market value) may not necessarily have a good transparency level.
The findings on the correlation above is supposed to provide a significant impact on
real estate activities, serving as investor magnets for Malaysia which would create
a sustainable investment climate and driver of injection of funds to boost and
strengthen its global position.
In comparison the top property company rankings and transparency indexes not
only differ in the companies investment strategies, but also in terms of management
decision strategies. By assessing these benchmarks, it will provide an overview of the
differences between the transparency benchmark and property companies
performances. This also highlights the importance of other factors in explaining the
ranking of the top 30 companies.

Selangor
Properties

15

KSL Holdings
Crescend

Paramount

Daiman
Development

Hua Yang

Eastern and Oriental

TAHPS Groups

10

KRIS Asset Holdings

Damansara
Realty

Oriental
Interest

Mutiara
Encorp Berhad
Goodyear
Guocoland Development

SHL Consolidated
IGB

5
Mah Sing Group

Metro Kajang

KLCC Property Holdings

Dijaya

SP Setia

10

15
Top 30

20

Country Heights
Holdings

25

30

Figure 1.
The transparency index
and top 30 property
companies rank
correlation

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According to the analysis, the matrix model empirically validated that the literature
suggested that a transparent market is able to attract professional investors locally as
well as globally. With a total amount of capital market of USD23 billion and being one
of the highest emerging markets, it is evident that Malaysia is able to attract investors,
both locally and internationally. Hence the analysis outcome supports this evidence.

412

Property implications
This paper has provided a comprehensive analysis on the current level of
transparencies based on the customised TM. Property companies in Malaysia were
assessed using these matrixes under two major elements corporate web site and
annual report. The number of listed real estate companies in Malaysia has increased
due to a property boom in the early 1990s. Transparency in property companies will
help companies increase their awareness of the availability of market information.
Furthermore, it will create benchmarking tools for performance information for listed
property companies in the property industry. This will allow investors to compare
fund-level performances. Consequently, it will contribute to the maturity of the
Malaysian real estate market.
The implication of transparency by property companies via the annual report and
corporate web site will allow the property market to be measured, tracked and
assessed accurately for various purposes. The level of transparency in the Malaysian
property market is at a satisfactory level. Property markets in this region continue to
mature in countries such as Vietnam and Indonesia. As such, the local property market
needs to increase its level of transparency for benchmarking of property investment for
the next level of transparency which is performance indices. With data quality
improved and easy to assess, the future development is to develop the investment
performance index.
The importance of transparency in the property market in Malaysia has received
substantial attention from regulators, financial institutions, investors and the academic
community, as the information will affect companies performance and market
valuation. This is evident from the establishment of DanaHarta and Danamodal; two
agencies under the Ministry of Finance, created to regulate and act to acquire nonperforming loans through statutory vesting, and to appoint special administrators who
can take control and manage the assets of borrowers unable to pay their debts. Post
Asian financial crisis has also seen the establishment of the National Property
Information Centre to provide advice and supply all property data to the government in
property industry decision making. The establishment of these three agencies are to
acquire more knowledge and information on the market including the property market.
The information and disclosure from the market is crucial for the government in the
decision-making process, specifically for the property market which was severely hit
during the AFC. This has been proven during the Global financial crisis where
Malaysia was one of the countries in South-East Asian that was quick to recovery from
the crisis.
Transparency and information disclosure practices have been considered as a
comprehensive corporate governance mechanism, both to mitigate agency costs by
increasing the monitoring of management actions and limiting managers
opportunities, and to promote the integrity of the securities market (Ashbaugh et al.,
2004; Chi, 2009). This study found that overall property companies that were
positively associated with the TM indicated that better transparency set a stronger
corporate governance mechanism, leading to good corporate performance.

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Stronger corporate governance will deliver higher shareholder returns (Chi, 2009). This
is evident from previous research conducted by Brown and Caylor (2006), companies
with better governance practices are more profitable, more valuable, less risky, less
volatile and pay more dividends. Weaker shareholders rights relate to lower profits
and lower sales growth (Gompers et al., 2003). In addition, La Porta et al. (2002), add
that better shareholder protection is empirically associated with a higher valuation of
corporate assets. The more transparent the Malaysian market, the more good
corporate governance will develop and more property market participants have the
opportunity to behave correctly.
Conclusion
This paper attempted to examine transparency levels by using property companies
web sites and annual reports. The TM were designed based on several literature
surveys and similar previous research as tools to investigate the level of transparency.
Based on earlier studied attributes, an index was developed and analysed further
constituting attribute rankings and company rankings based on the score. This
transparency index was then compared among the top 30 property companies in
Malaysia based on the market value. Overall, it was found that the transparency level
among the property companies in Malaysia is at a good level and is poised to
experience rapid changes.
With the average of 64.4 per cent of transparency attributes, most of the property
companies in Malaysia have widely implemented transparency elements. The awareness
of transparency in the property market has changed dramatically from the way
companies operate their business in order to create confidence for more investment. The
biggest property companies in Malaysia such as SP Setia, IJM Land and Glomac, reflect
their image as big companies from the transparency index perspective. These companies
managed to obtain the highest score in terms of the transparency index in Malaysia.
This paper also attempted to demonstrate the definition of transparency in the
Malaysian context, particularly for listed property companies. As such, top property
company rankings based on the market value and top transparency index, were also
tested to analyse rank correlation between these two indexes. However, this study showed
that there is no correlation on the relationship between the top 30 property companies
and the transparency index. This indicates that the top property companies in Malaysia
do not necessarily have good quality corporate web sites or annual reports to signify
their transparency policy in their companies. In addition, the availability of the internet as
a medium to express the transparency attributes is not widely used.
According to Khadaroo (2005), the decision to establish a web site is influenced by
several factors such as company size and expected number of users. The larger sized
companies are more likely to engage good quality corporate web sites as well as annual
reports. Interestingly some of the companies in the low-ranking groups in terms of
market value have scored a high-transparency attribute. It can be said that it is crucial
for the Malaysian property companies to have a good transparency level to attract fund
managers who have viewed emerging markets such as Malaysia to invest. As such,
transparency level will play its role towards the contribution of the property market
capitalisation in international property portfolios. More importantly, transparency has
been shown to become more significantly important in the Malaysian property
markets. The introduction of the recent government policies such as the ETP and
New Economic Model will provide greater opportunities for these companies to
demonstrate more transparency practices within their companies.

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Corresponding author
Muhammad Najib Razali can be contacted at: mnajibmr@utm.my
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