Curtin Graduate School of Business Predicting Whistle-blowing Intention in Malaysia: Evidence From Manufacturing Companies Nadzri Ab Ghani This thesis is presented for the Degree of Doctor of Philosophy of Curtin University January 2013 DECLARATION To the best of my knowledge and belief this thesis contains no material previously published by any other person except where due acknowledgement has been made. This thesis contains no material, which has been accepted for award of any other degree or diploma in any university. Signature: Date: i ACKNOWLEDGEMENTS Firstly, I thank Allah SWT for giving me the strength and courage to complete my PhD study. I am grateful to Curtin University for granting me with two superb supervisors, Professor Robert Evans and Associate Professor Jeremy Galbreath. I thank them for their support, advice and help in completing my thesis. Both their excellence as researchers and diligence as supervisors have shown me what a true scholar is like. Their positive feedback, theoretical knowledge and editorial advice have brought this thesis to its conclusion. My special thanks go to my wife, Intan Marzita Saidon, for her prayers, encouragement and support throughout my study. Also, I would like to thank my children, Naqib Idlan, Tariq Ridzuan and Nur Qamarina Inarah, for their understanding in times of difficulties. Not to be forgotten, my sincere appreciation goes to my family members, Mak, Kak Ros, Lina, Mawar, Reha, Abang Azim, Kak Diah, Kakak, Amin and Achu, for all their support and prayers. Finally, I would like to acknowledge the Malaysian Ministry of Higher Education and Universiti Teknologi MARA (UiTM) for giving me the opportunity to embark upon my PhD study. Thank you for everything! ii DEDICATION In loving memory of Haji Ab Ghani Ab Malek and Hajjah Che Kamariah Omar iii ABSTRACT ‘The world will not be destroyed by those who do evil, but by those who watch them without doing anything’ – Albert Einstein The function of whistle-blowing as an effective internal control mechanism has been accepted around the globe. Previous whistle-blowing literature includes many studies that have attempted to identify various predictive variables of whistle- blowing intention. However, the results of these studies remain inconclusive. Further, little is known about the underlying mechanism behind the relationships between the predictive variables and whistle-blowing intention. This study intends to advance research by investigating the relationships between several predictive variables (internal locus of control, work experience and ethics training) and whistle-blowing intention among supervisors in Malaysia. Additionally, supported by cognitive moral development theory, this study empirically investigates the mediating effect of ethical reasoning on such relationships. A two-stage sampling technique was applied to randomly collected data from 311 supervisors in large manufacturing companies listed under Bursa Malaysia Berhad. Structural equation modelling software (Analysis of Moment Structures, or AMOS) was applied to examine the direct and mediating effects of posited relationships. Results failed to support hypothesised relationships between both internal locus of control and work experience, and whistle-blowing intention. Only ethics training was statistically significant as a predictive variable for whistle-blowing intention among supervisors in Malaysia. Furthermore, internal locus of control was not significantly related to ethical reasoning. The other two predictive variables (work experience and ethics training), however, were significantly related to ethical reasoning. As hypothesised, ethical reasoning is significantly related to whistle- blowing intention. Findings confirmed that ethical reasoning mediates the relationships between both work experience and ethics training, and whistle- blowing intention. iv This study makes several theoretical contributions and provides further insights about current the whistle-blowing literature in Malaysia. Methodological and practical implications are discussed and several potential avenues for future research are identified and proposed. v TABLE OF CONTENTS Acknowledgements ............................................................................................................ ii Dedication ......................................................................................................................... iii Abstract ............................................................................................................................. iv List of Tables ...................................................................................................................... ix List of Figures ..................................................................................................................... x List of Appendices ............................................................................................................. xi List of Publications ........................................................................................................... xii CHAPTER 1: INTRODUCTION ........................................................................................ 1 1.1 Background .......................................................................................................... 1 1.2 Rationale of the study .......................................................................................... 5 1.3 Research questions .............................................................................................. 7 1.4 Research objectives ............................................................................................. 8 1.5 Significance of the study .................................................................................... 10 1.6 Definitions of Terms ........................................................................................... 14 1.7 Organisation of the thesis .................................................................................. 15 CHAPTER 2: LITERATURE REVIEW............................................................................... 17 2.1 Introduction ....................................................................................................... 17 2.2 An overview of the term whistle-blowing ......................................................... 17 2.3 Theory of planned behaviour ............................................................................ 18 2.4 Theory of planned behaviour and whistle-blowing intention ........................... 20 2.5 Ajzen’s (1988) model of planned behaviour ...................................................... 21 2.5.1 Attitude and behavioural belief ................................................................. 23 2.5.2 Subjective norm and normative belief ....................................................... 24 2.5.3 Perceived behavioural control and control beliefs .................................... 25 2.5.4 Antecedent variables external to the primary model................................ 27 2.6 Cognitive moral development theory ................................................................ 27 2.6.1 Psychology of ethical reasoning ................................................................. 28 2.6.2 Defining Issues Test (DIT) ........................................................................... 32 2.7 Ethical reasoning as a mediator ......................................................................... 33 2.8 Previous empirical studies regarding whistle-blowing ...................................... 38 2.8.1 Studies of whistle-blowing in western context .......................................... 38 2.8.2 Studies of whistle-blowing in Asia ............................................................. 41 2.8.3 Studies of whistle-blowing in Malaysia ...................................................... 42 2.9 Research gaps .................................................................................................... 44 2.10 Chapter summary .............................................................................................. 48 CHAPTER 3: THEORETICAL FRAMEWORK AND HYPOTHESES .................................... 49 3.1 Introduction ....................................................................................................... 49 3.2 Motivation for the study .................................................................................... 49 3.3 Justification of the selected variables ................................................................ 51 3.4 Conceptual framework ...................................................................................... 56 3.5 Theoretical framework ...................................................................................... 57 3.6 Hypotheses development .................................................................................. 58 3.6.1 Internal locus of control and Whistle-blowing intention ........................... 58 3.6.2 Work experience and Whistle-blowing intention ....................................... 60 3.6.3 Ethics training and Whistle-blowing intention ........................................... 61 vi 3.6.4 Internal locus of control and ethical reasoning ......................................... 62 3.6.5 Work experience and ethical reasoning .................................................... 64 3.6.6 Ethics training and ethical reasoning ........................................................