Academic literature on the topic 'Risk disclosures'

This study examines the role of the risk management committee as a moderating variable. The risk management committee will moderate the relationship between firm size, profitability, ownership concentration, and the size of the Enterprise Risk Management (ERM) disclosure board. The study is based on agency theory, which discusses the relationship between management and company owners and shareholders. The research sample consisted of 56 manufacturing companies in Indonesia with 224 units of analysis obtained using the purposive sampling technique. It has been proven that the risk management committee can moderate the relationship between firm size and ERM disclosure and ownership concentration and ERM disclosure. Company size is known to affect the disclosure of risk management in a company. But ownership concentration shows different things, that is, it does not affect corporate risk management disclosures. The results also show that the risk management committee cannot moderate the relationship between profitability and the size of the board of commissioners on the company’s risk management disclosures. It has also not been proven that profitability and the size of the board of commissioners directly affect corporate risk management disclosures. Thus, it can be stated that the risk management committee plays a role in controlling the extent of the company’s risk management disclosures; this is necessary to maintain stakeholder trust in the company.

We model managers' equilibrium strategies for voluntarily disclosing information about their firm's risk. We consider a multifirm setting in which the variance of each firm's future cash flow is uncertain. A manager can disclose, at a cost, this variance before offering the firm for sale in a competitive stock market with risk-averse investors. In our partial disclosure equilibrium, managers voluntarily disclose if their firm has a low variance of future cash flows, but withhold the information if their firm has highly variable future cash flows. We establish how the manager's discretionary risk disclosure affects the firm's share price, expected stock returns, and beta, within the framework of the Capital Asset Pricing Model. We show that whereas one manager's discretionary disclosure of his firm's risk does not affect other firms' share prices, it does affect the other firms' betas. Also, we demonstrate that a disclosing firm has lower risk premium and beta ex post than a nondisclosing firm. Finally, we show that ex ante, the expected risk premium and expected beta of each firm are higher under a mandatory risk disclosure regime than in the partial disclosure equilibrium that arises under a voluntary disclosure regime.

This paper discusses the mandatory risk disclosures in Canada under International Financial Reporting Standards (IFRS). U.S. mandatory accounting disclosures of risk are also briefly examined, since some Canadian companies are cross-listed in the US. Mandatory disclosures of risk under the Basel II and Basel III Accords for the international regulation of banks are discussed as well as the assessment of ERM by Standard & Poor’s. The risk disclosures in the Management Discussion & Analysis (MD&A) section of the annual report prescribed by the Canadian Securities Administrators (CSA) in National Instrument 51-102 Continuous Disclosure Obligations are examined. Since these risk disclosures are voluntary, the actual disclosures in the MD&A section of the annual report are entirely at the discretion of management subject to effective board oversight.

This study compares the disclosures about derivatives and market risk made by 25 SEC registrants in the years before (1996) and after (1997) the adoption of Financial Reporting Release No. 48 (SEC 1997) (FRR No. 48). FRR No. 48 requires firms to disclose how they account for derivatives and provide quantitative and qualitative disclosures about exposure to market risk. Market risk disclosures, encouraged but not required under FAS No. 119, improved greatly under FRR No. 48 but varied widely in detail and clarity. The majority of registrants provided quantitative and qualitative disclosures of market risk; however, only about half of these firms discussed the details and limitations of their risk measurement models and disclosures. Further, certain required or strongly recommended contextual disclosures were almost completely absent. Firms appear to prefer relatively complicated but more discreet disclosure formats to simpler but more revealing disclosure formats. Overall, while registrants greatly increased their disclosures about market risk, the disclosures leave room for improvement in future filings. These findings have significance for disclosure choice in general and the adoption of FAS No. 133 in particular.

In this study, we investigate the relationship between environmental, social, and governance (ESG) disclosures and stock price crash risk. A stock price crash is a dreadful event for market participants. Thus, exploring stock price crash determinants is helpful for investment decisions and risk management. In this study, we use samples of major market index components in Europe, the United States, and Japan to perform regression analyses, after controlling for other potential stock price crash determinants. We estimate static two-way fixed-effect models and dynamic GMM models. We find that coefficients of firm-level ESG disclosures are not statistically significant in the static model. ESG disclosure coefficients in the dynamic model are not statistically significant in the U.S. market sample. On the other hand, coefficients of ESG disclosure scores in the dynamic model are statistically significant and negative in the European and Japanese marker sample. Our findings suggest that ESG disclosures lower future stock price crash risk; however, the effect and predictive power of ESG disclosures differ among regions.

The paper provides early evidence on the informativeness of commodity price risk measures required by the Securities and Exchange Commission's new market risk disclosure rules (SEC 1997). I use existing disclosures of oil and gas producers (O&G) to obtain proxies for the tabular and sensitivity analysis disclosures required by the new SEC rules. I find that proxies for the tabular and the sensitivity analysis format are significantly associated with O&G firms' stock return sensitivities to oil and gas price movements. This finding casts doubt on claims that the new market risk disclosures do not reflect firms' risk exposures. The proxies for the tabular format and sensitivity format disclosures are not substitutable explanations of firms' risk exposures. This evidence suggests that disclosures from one disclosure format are not comparable to those from the other reporting format.

<p>This study aims to examine the influence of risk disclosures on a company's reputation, which was measured by the Indonesia’s Most Admired Company (IMAC) nomination in 2018. The sample applies the whole population registered in the IMAC. There were 133 companies which provided all data required. Using content analysis to calculate risk disclosures as independent variable and company's reputation by the Corporate Image Index (CII) as dependent variable, this study shows that risk disclosures has a significant influence on the company's reputation.</p><p>The results provide a new perspective on disclosure risk and company’s reputation since previous studies were very limited searching on risk disclosures related to corporate image. Since CII is publicly available, the risk disclosures need to be paid attention to balance the information for the stakeholders. Hence, this study contributes greatly for both academic and practice to understand that risk information may impact the corporate reputation, and therefore, adequate and balance disclosure (negative and positive information) is required. </p>

ABSTRACT On September 20, 2012, the rewards-based crowdfunding platform Kickstarter.com added a “risks and challenges” section to all project pages. While the section header became a mandatory part of the platform, discussion of risks within that section is voluntary and unverified, making this setting particularly useful for identifying the effects of disclosure on both crowdfunders and entrepreneurs. Consistent with increased salience of risks, we find that backer support for high-risk projects decreases after the introduction of this section, but that lengthier risk disclosures mitigate this decrease in backer support. Further analysis reveals that creators who provide lengthier risk disclosures also increase other non-risk disclosures, and that these non-risk disclosures are primarily responsible for the increased backer support. Collectively, we provide evidence that the introduction of a voluntary and unverified risk disclosure reduced information asymmetry within this unregulated market. JEL Classifications: M41; G24; L15; R12; D03.

This paper investigates the value relevance of risk disclosures relating to the use of financial instruments in the Australian metals and mining sector. The metals and mining sector is the largest sector in Australia by the number of companies and includes several of the world’s largest diversified resource producers. Using a manually constructed disclosure index based on AASB 7 Financial Instruments: Disclosures, we find that financial instrument-related risk disclosures provide useful information to equity investors. In terms of individual risk category, liquidity risk is shown to be the most informative risk disclosure. We contribute to a stream of the literature examining the informativeness of risk disclosures. The results of this study have implications for several stakeholders regarding the quality assessment of risk reporting. In addition, the findings are of interest to standard setters since further regulatory changes are under consideration to improve the presentation and disclosure of financial instruments.

Purpose – Communication of risk management (RM) practices are a critical component of good corporate governance. Research, to date, has been of little benefit in informing regulators internationally. This paper seeks to contribute to the literature by investigating how listed Australian companies disclose RM information in annual report governance statements in accordance with the Australian Securities Exchange (ASX) corporate governance framework. Design/methodology/approach – To address this study’s research questions and related hypotheses, the authors examine the top 300 ASX-listed companies by market capitalisation at 30 June 2010. For these firms, the authors identify, code and categorise RM disclosures made in the annual according to the disclosure categories specified in ASX Corporate Governance Principles and Recommendations (CGPR). The derived data are then examined using a comprehensive approach comprising thematic content analysis and regression analysis. Findings – The results indicate widespread divergence in disclosure practices and low conformance with the Principle 7 of the ASX CGPR. This result suggests that companies are not disclosing all “material business risks” possibly due to ignorance at the board level, or due to the intentional withholding of sensitive information from financial statement users. The findings also show mixed results across the factors expected to influence disclosure behaviour. While the presence of a risk committee (RC) (in particular, a standalone RC) and technology committee (TC) are found to be associated with some improvement in disclosure levels, the authors do not find evidence that company risk measures (as proxied by equity beta and the market-to-book ratio) are significantly associated with greater levels of RM disclosure. Also, contrary to common findings in the disclosure literature, factors such as board independence and expertise, audit committee independence and the usage of a Big-4 auditor do not seem to impact the level of RM disclosure in the Australian context. Research limitations/implications – The study is limited by the sample and study period selection as the RM disclosures of only the largest (top 300) ASX firms are examined for the fiscal year 2010. Thus, the findings may not be generalisable to smaller firms or earlier/later years. Also, the findings may have limited applicability in other jurisdictions with different regulatory environments. Practical implications – The study’s findings suggest that insufficient attention has been applied to RM disclosures by listed companies in Australia. These results suggest RM disclosures practices observed in the Australian setting may not be meeting the objectives of regulators and the needs of stakeholders. Originality/value – The Australian setting provides an ideal environment to examine RM communication as the ASX has explicitly recommended RM disclosures areas in its principle-based governance rules since 2007 (Principle 7). This differs from other jurisdictions where such disclosure recommendations are typically not provided and provides us with a benchmark to examine the nature and quality of RM disclosures. Despite the recommendation, the authors reveal that low levels and poor RM communication are prevalent in the Australian setting and warrant further investigation.