Examining the relationship between board characteristics and financial risk disclosure: A longitudinal analysis based on agency theory (original) (raw)

Do board characteristics impact corporate risk disclosures? The Indian experience

Journal of Business Research, 2020

This study's primary purpose is to assess the corporate risk disclosure (CRD) practices of Indian firms and examine the potential impact of the board characteristics on risk disclosure levels. The study uses sample data of non-financial Indian firms listed on the Bombay Stock exchange (BSE). The generalized method of moments (GMM) is applied to test a theoretical framework. The study found that the women on the board made a positive and significant impact on risk disclosure. Along with this, other governance indicators such as non-executive directors and multiple directorships have significant positive and negative associations. Factors such as board size, executive directors, and independent directors have no significant impact whatsoever on corporate risk disclosure. 2. The literature From an agency theory perspective, corporate risk disclosures serve as a instrument to reduce the information asymmetry between the managers and the investors (Jensen & Meckling, 1976). Well governed firms are bound to signal their quality to the investors by way of periodic and highly informative corporate risk disclosures that allay investors' concerns of the firm's risk. This is bound to lead to lower cost of

Board structure and the informativeness of risk disclosure: Evidence from MENA emerging markets

Advances in Accounting, 2016

We examine whether board characteristics affect firms' decision to voluntarily disclose informative information about their risk profiles. We base our study on data from 320 listed firms in nine MENA emerging markets (789 observations) over the period from 2007 to 2009. Our study offers significant contributions to the growing risk disclosure literature. It provides new empirical evidence that information driven by some board characteristics affects the perceived relevance of narrative risk information. Our findings suggest that the composition of the board and its size enhance the informativeness of risk disclosure as it allows investors to better predict future earnings growth. A further finding is that a CEO/Chairperson duality does not impact the way investors trust risk disclosures.

Does the Board Independence Influence the Association Between Risk Disclosure and Firm Value? Evidence from Jordan

Humanities & Social Sciences Reviews

Purpose of the study: This paper aimed to investigate the influence of risk disclosure on corporate value and investigate whether the effect of risk disclosure on corporate value is moderated by the level of independence of boards of directors. Methodology: Using an analysis of annual reports, the study depended on a set of balanced panel data derived from 13 banks listed on the “Amman Stock Exchange” (ASE) from 2014 to 2018. Main Findings: The empirical results indicated that the association between risk disclosure and the corporate value was significant but negative. To examine the influence of the moderating variable, hierarchical regression models were used. The results regarding the moderating effect indicate that board independence (BI) positively moderated the association between risk disclosure and corporate value. Applications of this study: The findings of this article can provide insights into the association between risk disclosure and corporate value and the moderating ...

Does Institutional Ownership Moderate the Relationship Between the Board of Directors and Risk Disclosure?

Jurnal Akademi Akuntansi

The purpose of this study is to dissect the ways in which institutional ownership, the number of years a board has been in operation, and the representation of women on the board each influence the strength of the association between risk disclosure and other parameters. Purposive sampling was utilized to collect data from commercial banks registered with OJK between 2017 and 2021. From 41 different locations, 205 samples were taken. To test their hypothesis, the researchers used a panel data regression model. Several different types of descriptive and inferential statistics tests were utilized in this investigation, including but not limited to likelihood, Breusch-Pagan, and Hausman tests, as well as tests for heteroscedasticity and autocorrelation. We utilize the fixed effect model to analyze the correlation between the variables in Regression Models 1 and 2 based on the results of the aforementioned three preliminary tests for the panel data regression model. According to the dat...

Firm Size, Board Size, And Ownership Structure And Risk Management Disclosure

JURNAL AKUNTANSI DAN KEUANGAN ISLAM

This research aims to examine the influence of firm size, board size, and ownership structure on risk management disclosure on syariah banking in Indonesia 2011-2014. This research uses secondary data which is the annual report of syariah banking. The sample was selected by purposive sampling which are 10 syariah banking qualified in this research. This research conducts multiple linear regression analysis method to examine the hypothesis in the level of significance 5%. The result of this research showed that firm size, board size and public ownership have influence on risk management disclosure. Meanwhile, the institutional ownership didn’t have a significant impact on risk management disclosure

The Influence of Royal Board of Directors and Other Board Characteristics on Corporate Risk Disclosure Practices

Corporate Ownership and Control, 2017

This study focuses on Saudi’s unique social and cultural context and its impact on board attributes and corporate risk disclosure (CRD) by addressing the relationship between royal family members on the board and CRD. Using content analysis of a sample of 307 company-year observations over the period of 2008-2011, the results from the descriptive statistics show a moderate level of CRD practices among firms. The initial and additional results from the panel data analysis show that board characteristics, namely, board size, board independence, royal family members on the board, and meeting frequency of the board of directors are important determinants of CRD in Saudi Arabia. The positive influence of royal family members on CRD in this study contradicts the classic negative relationship between family members on the board and disclosure, which indicates that not all types of families’ members on the board have the same motivation towards corporate disclosure.

Financial Risk Disclosure and Corporate Governance

2021

Risk disclosure, especially financial risk disclosure, is useful for providing information to stakeholders about how the risk arises, as well as how management handles risk and the impact of such risks. Risk disclosure is also used to reduce agency conflict and asymmetry information problems. This research aims to examine and analyze the effects of corporate governance on financial risk disclosure in banking companies listed in the Indonesian Stock Exchange. The final sample of this study was 20 banks listed on the Indonesian Stock Exchange in 2015-2017. The result shows that both the number of commissioners' board and the number of audit committee meetings have a significant positive effect on the extent of financial risk disclosure. Our findings indicate that the existence of the commissioners' board is important as part of the internal control function of financial risk that will be disclosed by the company. The results of this study were also able to prove that the supervisory activities by the audit committee in the form of an audit committee board meeting affect financial risk disclosure. Overall, our study provides additional evidence that corporate governance mechanisms affect the broad disclosure of a company's financial risk.

The Interplay between Board Characteristics, Financial Performance, and Risk Management Disclosure in the Financial Services Sector: New Empirical Evidence from Europe

2021

This paper empirically evidences the role played by board characteristics (skills, diversity, structure, independence) in supporting risk management disclosure and shaping the financial performance of European companies operating in the financial services sector. We exploit data selected from Thomson Reuters Eikon database in 2020 for the last fiscal year 2019 (FY0) on a longitudinal sample of 144 companies with the head offices in Europe (25 countries). Following an original empirical approach based on two modern financial econometric techniques, namely structural equation modelling (SEM) and network analysis through Gaussian graphical models (GGMs), the research endeavor outlines the decisive importance of an optimal board size, enhanced management skills, upward gender diversity (encompassed by women participation on board management), and structure (mainly a two-tier type, one management board, and a distinctive supervisory board) as fundamentals of risk management strategies, l...

Corporate boards, ownership structures and corporate disclosures

Journal of Applied Accounting Research, 2018

Purpose The purpose of this paper is to investigate the effect of corporate board attributes, ownership structure and firm-level characteristics on both corporate mandatory and voluntary disclosure behaviour. Design/methodology/approach Multivariate regression techniques are used to estimate the effect of corporate board and ownership structures on mandatory and voluntary disclosures of a sample of Libyan listed and non-listed firms between 2006 and 2010. Findings First, the authors find that board size, board composition, the frequency of board meetings and the presence of an audit committee have an impact on the level of corporate disclosure. Second, results indicate that ownership structures have a non-linear effect on the level of corporate disclosure. Finally, the authors document that firm age, liquidity, listing status, industry type and auditor type are positively associated with the level of corporate disclosure. Research limitations/implications Future research could inves...

How Corporate Characteristics and Good Corporate Governance Affect Risk Management Disclosure

East African scholars journal of economics, business and management, 2023

Disclosure of risk is the provision of information about the risks encountered by the firm and how risk management is conducted. Disclosure of risks is essential for assisting stakeholders in obtaining risk profile information and management. This study aims to evaluate and assess the impact of firm factors (size, liquidity, profitability, leverage) and effective corporate governance (size of the board of directors and ownership structure) on risk management disclosures. For 2020-2021, the IDX has a quarterly listing of the research population for textile and apparel subsector manufacturers (quarterly). With a total of 64 observations, the sampling method is nonprobability with purposive sampling. Quantitative research and secondary data sources are categorized-as descriptive statistical data analysis methodologies. Before multiple regression analysis, all data were subjected to classical assumption tests (normality test, multicollinearity test, and heteroscedasticity test). According to the determination coefficient test results, all independent factors had an influence of 64.3% on risk management disclosure. The effects of research on business size, profitability, leverage, and ownership structure on risk management disclosure are beneficial. On risk management disclosure, liquidity has a negative influence, whereas the size of the board of commissioners has no effect. Future researchers are anticipated to expand their efforts so that test findings are more precise and reliable and to measure the ownership structure of various components.