*2.4. Theoretical Framework*

This paper uses the institutional theory to support the corporate governance disclosures by Indonesian and Malaysian FinTech companies. Corporate governance disclosure is an organizational practice that is shaped by the institutional environments in which the organizations operate [41,42]. Wijayati [42] argued that the institutional theory could explain the corporate governance disclosure practices in Indonesia and Malaysia due to the differences in corporate governance practices in both countries. According to Wijayati [42], a country with a specific institutional framework undergoes isomorphic processes that cause corporate governance practices to become increasingly uniform among enterprises.

According to DiMaggio and Powell [43], the situation that explains the standardization of organizational practices is isomorphism. Isomorphism could be classified into coercive, normative, and mimetic. The highly noticeable institutional pressure is coercive isomorphism. Based on DiMaggio and Powell [43], forces can be exercised by another corporation on which a corporation may be dependent, in addition to cultural beliefs inside the organization's operating environment. This paper uses the coercive isomorphism tenet to explain the extent of corporate governance disclosure in both Indonesian and Malaysian FinTech companies. This paper discusses the coercive pressures from the regulatory authority monitoring and regulating corporate governance practices.

Mimetic isomorphism constitutes the second institutional pressure. Mimetic isomorphism encourages copying the best practices of legitimate and successful organizations [43]. The copying behavior is likely to occur if the organizations have doubts about executing specific best practices that lead to mimicking behavior among members in the same organizational field.

Normative isomorphism is the third isomorphism. This pressure usually arises from professionals and occupational groups [39]. This is normally the sharing of norms, beliefs, and culture involving the organizational practices throughout the corporations.

#### **3. Methodology**

The data in this study were collected based on a content analysis of the disclosure of corporate governance information on the websites of Malaysian and Indonesian FinTech companies. Since websites offer the maximum openly accessible information that could be employed as a credible supply of data, the disclosures on the website were examined [39]. In addition, Malaysia and Indonesia are implementing voluntary disclosure of corporate governance information on their FinTech companies' websites.

Content analysis has been extensively carried out in disclosure studies, for example, Joseph et al. and Midin et al. [39,44]. One of the effective ways to quantify qualitative data is through content analysis, which enables us to analyze practices through disclosures [45]. The Modified Corporate Governance Disclosure Index (MoCGovDi) was developed based on several steps.

1. Step 1

Reference was made to the ASEAN Corporate Governance Scorecard (ACGS), which has two levels of scoring for corporate governance practice. The measurement of governance ratings is prepared based on the methodology applied in the ASEAN countries and multilateral institutions such as the OECD. The ACGS is a scorecard of the good corporate governance evaluation and ranking for public companies in ASEAN. This scorecard is a provincial effort from the ASEAN Capital Market Forum (ACMF) in cooperation with

the Asian Development Bank (ADB) since 2011 [46]. This paper refers to the first level of scoring, comprised of five categories (146 items) based on the principles of governance by the OECD. All the questions in the five parts are refined as disclosure items in the development of the Modified Corporate Governance Disclosure Index (MoCGovDi). Originally, the details in five parts of level 1 scoring are:


Reference was made to past literature to ascertain the additional items to be incorporated into the MoCGovDi, i.e., (1) Feldioreanu & Seria; (2) Suwaidan et al. [47]; (3) Hassan [48]; (4) Shahar et al. [30]. The modification to the current standard measurement of corporate governance disclosure is important because this study aims to examine the actual disclosures available on websites. In addition, the study takes into consideration the disclosure items that are available for FinTech companies in both countries and, at the same time, determines whether the disclosure is in line with past literature, which is commonly performed in the disclosure index development, e.g., see Joseph et al. [49].

3. Step 3

Steps 1 and 2 are combined. The total number of items is equal to 157.

4. Step 4

Referring to items in Step 3, the content analysis on three websites from each country was conducted. The actual disclosed items were identified and added to the MoCGovDi. The 102 non-disclosed items were eliminated from the MoCGovDi. Five overlapping items were also deleted from the checklist.

5. Step 5

The MoCGovDi is sent for validation by academicians specializing in corporate governance.

6. Step 6

The final MoCGovDi consists of five categories and 50 items. Figure 1 summarizes the steps.


In this study, data was collected in each country by coders, who assigned scores of 1 for relevant disclosure and 0 for no disclosure, following Joseph et al. [39]. Nevertheless, the analysis of data for both countries was merged. In order to lessen bias and increase trustworthiness, the two coders in each country performed the content analysis. Between 26 June and 11 July 2022, coders collected and tabulated the disclosure information from the websites. The Statistical Package for Social Science (SPSS) was used to compute and analyze the frequency of sub-categorizations. The sample selection of this research was based on the websites https://fintechnews.sg/fintech-startups-in-indonesia/ (accessed on 26 June 2022) for Indonesian FinTech companies and https://fintechnews.my/list-fintechstartup-malaysia-fintech-companies-malaysia-directory/ (accessed on 3 July 2022) for Malaysian FinTech companies. To answer the first research question, descriptive tests were performed. The independent t-test and ANOVA were performed to answer the second research question.

**Figure 1.** Steps in the Development of Modified Corporate Governance Disclosure Index (MoC-GovDi).

#### **4. Results and Discussion**

The descriptive tests are carried out to answer the first research question. Table 2 shows that the total sample of Indonesian and Malaysian FinTech companies are 148 and 159, respectively. The mean of disclosure for Indonesian FinTech companies is 6.74, while the mean of disclosure for Malaysian FinTech companies is 8.5. It shows that Malaysian FinTech companies disclose more information than their Indonesian counterparts. However, Malaysian FinTech companies have greater dispersion of disclosure. It was indicated by a higher standard deviation score than Indonesia.

**Table 2.** Descriptive Statistics.


The highest amount of disclosure items by Indonesian FinTech companies is 44 items, while the highest amount of disclosure items by Malaysian FinTech companies is 46 items. The company with the highest amount of disclosure is a payment FinTech, i.e., Cashlez. Cashlez disclosed many items due to its status as a listed company on the Indonesian Stock Exchange. Therefore, Cashlez is obliged to implement good corporate governance practices. Moreover, the same thing happens in the Malaysian FinTech industry. XOX Mobile, the company with the highest disclosure, is also listed in Bursa Malaysia. Some companies with a high amount of disclosure, such as Grabkios, Paypal, Samsungpay, TM One, and Rakuten Trade, are due to their websites being integrated with their parent companies. This clearly indicates that the parent company is responsible to coerce the requirements for subsidiary companies to implement the SDG 16 initiatives that include the disclosure of corporate governance information on websites.

In terms of the most disclosed items, the two items that are the most disclosed by FinTech companies in Indonesia and Malaysia are the items of the company's activity and company's policy and practices to address customers' welfare. Both items focused on customer services and overall information about the firm. It shows that as an emerging and growing industry, FinTech companies are more concerned about the business aspect than the governance aspect. Therefore, the lack of accountability due to low disclosure of corporate governance information might hamper the achievement of SDG No 16. This indicates that Fintech companies in both countries are not fully ready to contribute to global governance through their external engagement with other stakeholders. Thus, more awareness of the importance of SDG 16 via corporate governance disclosure should be promoted, as SDG 16 permits firms to communicate their broader role in shaping societies and institutions.

The second research question in this study is: do the country and type of FinTech services affect the extent of corporate governance disclosure in both Malaysian and Indonesian FinTech companies? Previous studies have deemed that the country is a critical factor influencing the disclosure level [50,51]. The second research question is answered by the *t*-test. The p-value in the t-test takes 0.044 < 0.05 (Sig. level). Thus, country has a significant effect on the corporate governance disclosure of FinTech companies. Therefore, the findings suggest a statistical association between the countries and the amount of corporate governance disclosure on the websites.

According to the result of the *t*-test in Table 3, this study found that Malaysian FinTech companies disclose more corporate governance information than their Indonesian counterparts. The possible reason for this difference might be due to Malaysian Code of Corporate Governance (MCCG) came earlier in 2000 than the Indonesian GCG Code in 2006. Therefore, MCCG is more embedded in Malaysian companies. Besides that, according to the coercive isomorphism tenet, it might imply that Malaysia's government uses its coercive powers to pressure businesses to disclose corporate governance information rather than Indonesia's government. This finding is incompatible with the study conducted by Joseph et al. [39] that indicated Indonesian local authorities or provinces exceeded Malaysia's city and municipal councils' disclosures. Thus, it is maintained that the push towards achieving SDG 16 via disclosure practices differs based on the functions of organizations. Undeniably, the close tie between local authority and community assists in advancing SDG 16 as compared to role of business organizations such as FinTech companies in maximizing profits. In addition, different priorities in certain sectors in different countries also potentially influence the variation in corporate governance disclosure that affects the realization of SDG 16.



The results shown in Table 4 show that payment FinTech is the most prominent type of FinTech company in Indonesia and Malaysia (115 companies), followed by lending FinTech (42 companies). The mean of disclosure for payment and lending FinTech companies is also the largest among the sector, with scores of 8.6 and 8.3, respectively. However, payment FinTech companies have greater dispersion of disclosure than lending FinTech companies. It is indicated by the higher score of the standard deviation of payment FinTech companies. It is possible since payment and lending FinTech companies as the most popular type of FinTech. Both service types gained the most active users in Indonesia and Malaysia. Therefore, there might be enforcement by BI, BNM, OJK, and SC as the regulators of payment and lending FinTech companies to disclose more rather than their counterparts. It indicates that coercive isomorphism from relevant authorities such as BI, BNM, OJK, and SC might force both service types to comply more with the corporate governance code.

BNM and BI regulate digital payment and e-money. Meanwhile, SC and OJK regulate the other fintech sector such as crowdfunding, peer-to-peer lending, and the like. The regulators have introduced The Regulatory Sandbox to facilitate and encourage FinTech innovation. It is a formal regulatory program that allows FinTech firms to test their business model in actual business practice, subject to certain safeguards and oversight. The regulators need to be flexible to welcome new entrants and take a more business-friendly approach in allowing financial innovation and sectorial growth. However, they also must be cautious in their licensing and approval processes, where only new operators with proper capability and resources will be selected to ensure adequate safeguards and system integrity are in place and to prevent over-crowding in the FinTech space in Indonesia and Malaysia.

**Table 4.** Descriptive Statistics.


The second research question has been tested using ANOVA. The relationship between each group of FinTech companies by service type and the extent of information disclosed is shown in Table 5. The *p*-value in the ANOVA = 0.236 > 0.05 (Sig. Level), indicating the means between groups are similar. Consequently, the type of FinTech service does not influence the total quantity of disclosure.

**Table 5.** ANOVA test for Service Type of FinTech.


Based on the result of the ANOVA test, this study is in line with Herrador-Alcaide and Hernández-Solís [23], which found no significant relationship between service type and the amount of disclosure. Therefore, the type of FinTech service has no significant influence on corporate governance disclosure though the means of corporate governance disclosure are higher for payment and lending FinTech companies. This finding implies that the type of FinTech service is not a factor that determines the disclosure level of corporate governance information. As a result, it is impossible to distinguish between disclosures made by various FinTech subsectors on the websites. It shows that there might be a lack of pressure from regulators on specific FinTech companies. Even the two most popular and prominent types of FinTech companies, namely payment and lending FinTech companies, have no significant difference from other FinTech service types in disclosing corporate governance information.

#### **5. Conclusions**

This paper has achieved the intended objectives and has answered the research questions. The findings show that FinTech companies provide around 7 to 9 out of 50 disclosure items. This paper cannot figure out the existence of a homogeneous disclosure structure in Indonesian and Malaysian FinTech companies. On the other hand, this study identifies a similar disclosure practice among FinTech companies in any service type. FinTech companies also lack a habit of voluntarily disclosing corporate governance information. This disclosure is more inclined toward the promotion of the business. FinTech companies might focus more on the business rather than the governance aspect. Hence, the information is emphasized on services in FinTech and general information about the company. This low corporate governance disclosure will inhibit the distribution of pivotal information to shareholders. Therefore, this lack of disclosure will hinder the attainment of SDG No 16, which campaigns for the provision of access to justice for all and for building effective and accountable institutions.

To conclude, there is a variation in the total volume of disclosure of FinTech companies in both countries. Malaysian FinTech companies disclose more information than their Indonesian counterparts. However, in terms of service type, there is no difference in the level of disclosure when taking into account the type of service provided.

The findings of this study have implications. To demonstrate their accountability to stakeholders, particularly their shareholders who provide the capital to run the business, it suggests that FinTech companies in Indonesia and Malaysia need to enhance their corporate governance disclosures on their websites. Since the corporate governance disclosures were low (around 7 to 9 out of 50 disclosure items), FinTech companies must enhance their accountability by communicating corporate governance information on their websites. Simultaneously, it will help realize SDG No 16 in achieving sustainable and accountable institutions.

This study also suggests that all service types of FinTech companies need to demonstrate their accountability by disclosing more corporate governance items. Especially, the two most popular and prominent fintech services, namely payment and lending FinTech companies. Since both service types gained the most active users and financial transactions, thus, the findings from this study can be used by FinTech companies to improve transparency and accountability by using websites to share corporate governance information. The findings also become valuable input for regulators to formulate a policy to increase compliance with the code of corporate governance for FinTech companies, which in turn will assist the achievement progress of SDG No 16.

Just like any other study, this study has its limitations. The content analysis technique at all time deal with the inevitable problem of bias [52]. However, as this study used more than one coder to assign scores, subjectivity could be reduced, and the accuracy of assigning scores increased. Because the study's focus was solely on website disclosures, the results should only be interpreted considering the time frame in which it was conducted, given that website content is constantly changing.

Future research could continue this study by using interviews to understand better the motivations behind disclosed and undisclosed corporate governance information. Future studies will also find it fascinating to provide information on factors affecting the level of disclosures in corporate governance information.

**Author Contributions:** Conceptualization, E.S., C.J., V.V. and I.Y.; methodology: C.J. and V.V.; data curation, V.V.; formal analysis, investigation, validation, E.S., C.J., V.V. and I.Y.; writing—original draft, E.S., V.V. and I.Y.; writing—review and editing, C.J. All authors have read and agreed to the published version of the manuscript.

**Funding:** This study was carried out with the collaboration of Universitas Pembangunan Nasional Veteran Jawa Timur and UiTM Cawangan Serawak. This research was funded under the scheme of Kerjasama Luar Negeri, UPN Veteran Jawa Timur, grant number SPP/85/UN.63.8/LT/IV/2022, and the APC was funded by UPN Veteran Jawa Timur.

**Institutional Review Board Statement:** The study was conducted in accordance with the Declaration of Helsinki and approved by the Ethics Committee of Universitas Pembangunan Nasional Veteran Jawa Timur (21 September 2022).

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** Not applicable.

**Conflicts of Interest:** The authors declare no conflict of interest.
