CHAPTER 01

INTRODUCTION
1.1.Background of the study
The information technology revolution, in particular the advent of computer technology, has
significantly impacted accounting practice and accounting communication. Many companies
are now utilizing the advantages of the Web for disseminating financial information.

Firms’ stakeholders need financial information for decision making (………………….). In

the ancient times, companies were communicated their financial information with their
stakeholders through the printing materials (………….). That methods created more cost
because companies were gave the financial information and reports via printed book. And
users also faced more difficulties to access the information (………………………….).

Nowadays companies improve their information technology infrastructures, and

communicate their all financial related materials and other information through the
internet(………). Internet Financial Reporting (IFR) enables companies 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
company websites (Kelton & Yang 2008).

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 (………….).

Company will reduce information asymmetry when there is more disclosure information
through the internet (Diamond & Verrecchia, 1991). This information can lead to better
performance because it improves the company’s image, reputation, and trustworthiness
(……………).
 1.2.Research problem
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, 2003).

Corporate internet reporting (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 (Check, Mohamad, Yunus, & Norwami,
2013).

At the same time, in the developed countries, it is very common phenomenon that companies
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 (……..). Sri
Lanka is a developing country, nowadays after the war, a number of new companies are
incorporated in Sri Lanka within a short time of period. Most of the Srilankans are invest
their money in the stock market activities.

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 (Sia,
Brahmana and Memarista, 2016) , and some conclude that there is no impact over the firm
performance (Al-ebrahem, 2017). But there are few studies are conducted in Sri Lanka. So
the study is needed.Therefore, this study is aimed to test this issue furthermore in the Sri
Lankan context specifically in the case of bank, finance and insurance firms by selecting a
different time period (2017-2018).

1.3.Research Question
This study answers to the following questions:

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
Main objectives of this study is to examine the impact of corporate internet reporting on firm
performance.

Secondary objectives of this study is to investigate the relationship between corporate internet
reporting and firm performance.

1.5.Significance of the Study

Corporate internet reporting represents one of the voluntary types which helps to achieve
transparency by disseminating various types of timely information by using different
presentation types and easily accessible tools.

The increasing use of the internet has created a new opportunity for companies 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 companies’ willingness to fulfil the needs of stakeholders for accurate information
in a timely basis, CIR demands a continuous updating of information disclosed online.
Corporate internet reporting enables companies’ 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.
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
(Wagenhofer, 2003).
The findings of the research will be practically useful especially for managers and other
decision makers in bank, finance and insurance firms to make their decisions in a proper
manner regarding investment.

1.6.Scope of the Study

The Colombo stock exchange (CSE) has 290 companies representing 20 sectors as at 20 th
January 2020 as per the scope of the study, only the listed Bank, Finance and Insurance
companies will be selected for the study purposes.
 1.7.Limitation of the Study
This study uses a sample of 68 bank, finance and insurance companies out of the 290 listed
companies in CSE and covers only a two year period. The size of sample can be extended to
further improve efficiency of model.

Secondary data have been used.

Despite the fact that reliable conclusions can be made from this research, data collected for
this research is specific to the selected listed companies, so may not necessarily apply to
some of the companies listed but not covered in this study and companies not listed on the
CSE. The result and the interpretation are completely rigid and from the viewpoint of the
researcher. And statically errors may arise.

1.8.Structure of the dissertation

This study is related to corporate internet reporting and its impact on firm performance of
listed bank, finance and insurance companies in CSE, Sri Lanka. The study is organized into
five chapters.

The chapters are structured as follows:

The first chapter introduces about the corporate internet reporting and its importance. It
provides brief insight in to the research study. This chapter provides background of the study,
research problem, research question and objective of the study, significant of the study, scope
of the study, and limitation of the study.

The second chapter reviews the theoretical framework. This part also includes the empirical
evidence from previous studied related to this topic.

Chapter three discuss the methodology of the study. The chapter describes the research
design, the research sample and method of data collection, conceptualization,
operationalization and mode of analysis used in the study.

Chapter four is the data presentation and analysis of the study.

Chapter five is the conclusion and recommendation for future study related to the corporate
internet reporting and firm performance.
 1.9.Chapter Summary
This chapter presents proper introduction about corporate internet reporting and importance
of the topic. Basically it reveals the theoretical background of the study and how the relevant
topic is influencing the selected industry. Further it explains the importance of understanding
the research topic in Sri Lankan context.