Management obfuscation through mandatory financial risk disclosure: evidence from European-listed banks

Purpose This study aims to investigate the readability of financial risk disclosure divulged by listed banks of the first five European countries according to gross domestic product. Design/methodology/approach This study adopts the management obfuscation hypotheses and tests data gathered for a sample of 790 observations from listed banks in Europe covering the 2007–2018 period. This study uses a readability index (Gunning’s fog index) as the dependent variable for measuring the readability of banks’ mandatory financial risk disclosures. Moreover, it relies on a completeness index, discretionary accruals and several control variables for identifying the determinants of risk disclosure readability using ordinary least square regression for testing the hypotheses. Findings The findings show the existence of a positive relation\nship between readability and completeness of risk disclosure. In contrast, a negative relationship exists between readability and banks’ discretionary accruals. Originality/value This study expands the stream of accounting literature analyzing the lexical characteristics of narrative risk disclosure, and, by focusing on the financial risk disclosure of banks, it extends the readability-related debate, which has primarily concentrated on other types of disclosure to date. This study is relevant to regulators and policymakers for fostering reflections as actions for improving the financial risk disclosures readability. This study is also of potential interest for investors to better delve into the questions surrounding risk disclosure.

Assessing and disclosing test results for ‘mild cognitive impairment’: the perspective of old age psychiatrists in Scotland

Background Mild cognitive impairment (MCI) is a condition that exists between normal healthy ageing and dementia with an uncertain aetiology and prognosis. This uncertainty creates a complex dynamic between the clinicians’ conception of MCI, what is communicated to the individual about their condition, and how the individual responds to the information conveyed to them. The aim of this study was to explore clinicians’ views around the assessment and communication of MCI in memory clinics. Method As part of a larger longitudinal study looking at patients’ adjustment to MCI disclosure, we interviewed Old Age Psychiatrists at the five participating sites across Scotland. The study obtained ethics approvals and the interviews (carried out between Nov 2020–Jan 2021) followed a semi-structured schedule focusing on [1] how likely clinicians are to use the term MCI with patients; [2] what tests clinicians rely on and how much utility they see in them; and [3] how clinicians communicate risk of progression to dementia. The interviews were voice recorded and were analysed using reflective thematic analysis. Results Initial results show that most clinicians interviewed (Total N = 19) considered MCI to have significant limitations as a diagnostic term. Nevertheless, most clinicians reported using the term MCI (n = 15/19). Clinical history was commonly described as the primary aid in the diagnostic process and also to rule out functional impairment (which was sometimes corroborated by Occupational Therapy assessment). All clinicians reported using the Addenbrooke’s Cognitive Examination-III as a primary assessment tool. Neuroimaging was frequently found to have minimal usefulness due to the neuroradiological reports being non-specific. Conclusion Our study revealed a mixture of approaches to assessing and disclosing test results for MCI. Some clinicians consider the condition as a separate entity among neurodegenerative disorders whereas others find the term unhelpful due to its uncertain prognosis. Clinicians report a lack of specific and sensitive assessment methods for identifying the aetiology of MCI in clinical practice. Our study demonstrates a broad range of views and therefore variability in MCI risk disclosure in memory assessment services which may impact the management of individuals with MCI.

Risk Information in Non-Financial Disclosure

This paper aims to research the topics related to risk included in non-financial disclosure (NFD) of companies listed on the Warsaw Stock Exchange (WSE) and explore factors that influence the risk topics ratio in NFD. We applied a content analysis using topic modeling to discover latent risk topics in NFD. Next, with Ward’s clustering, we identified four groups of companies with a homogenous risk topic mixture. For causal analysis, to explain the differences in risk topics ratio, we used qualitative comparative analysis (QCA), which allowed us to obtain three paths (variable configurations) leading to the high ratio of risk topics in NFD. Our results suggest that companies disclosing risk information extensively in their NFDs concentrate almost solely on social risk matters. In contrast, companies talking briefly about environmental and social (E&S) risk prepare their NFDs with a more balanced distribution of E&S topics and their financial implication. In general, the companies’ exposure to E&S risk and the use of NFD standards and guidelines as well as the type of NFD impact the space dedicated to risk information. This paper contributes to academics and regulators, filling the gap about risk disclosure in the NFD, identifying the nature of corporate risk disclosures, and upgrading research about determinants of risk information in non-financial disclosure.

Impact of risk disclosures on IPO performance: Evidence from India

The main aim of the paper is to explore the performance of Indian IPOs in the context of risk disclosures in the offer documents. For the purpose of assessing the impact of risk disclosure factors on initial returns, subsequent returns and post issue risk of IPOs, the study has implemented ordinary least square regression. The study has analysed 109 IPOs that were listed in two main Indian stock exchanges (BSE and NSE) from 2015–2019. Outcomes of the present study are contrary to the previous studies which showed that information disclosure reduces the asymmetry, which is touted as the main reason for underpricing, the present study did not find any association between risk disclosures and underpricing. Quantitative risk measures showed positive association with 1-year returns, but qualitative measures failed to show any association. The post issue risk of the firms showed positive association with external risk factors listed in prospectus and negative association with liquidity. The results of this study are useful for the investors as based on the results they can make decisions about investing in Indian IPOs. Besides, the managers of issuing companies and lead managers of issues can use the results of this study to improve the pricing of issues. To the best of the authors’ knowledge no study has been done before in the Indian context which is specific to risk disclosures (quantitative and qualitative measures) and IPO performance. The present study seeks to fill this gap and contribute to the existing literature.

Firm’s size, mandatory adoption of IFRS and corporate risk disclosure among listed non-financial firms in Saudi Arabia

This study examines the relationship between the mandatory adoption of International Financial Reporting Standards (IFRS) and the disclosures of corporate risk among non-financial firms in Saudi Arabia. Based on the observation of 320 firm-year from 2015 until 2017, this study reveals a positive relationship between the mandatory adoption of IFRS and the corporate risk disclosures. The relationship holds when we decompose corporate risk disclosures into financial and non-financial risk disclosures. The results are consistent for both the pooled Ordinary Least Squares (OLS) and random effects estimations. Additionally, the result is steady with all primary categories except risk management. We also provide evidence that large firms are more likely to adopt IFRS and reveal more risk information than small firms. This study’s findings are relevant for market regulators in their attempt to improve corporate risk disclosures among listed firms in Saudi Arabia.

Information and Analytical Support for Sustainable Development of Companies Based on IFRS

The article focuses on the sustainable development initiatives and sustainable development standards, which are the bases of information-analytic analysis, helping investors to understand the IFRS’ role in climate risk disclosure and other sustainable development risks.

Corporate Governance and Risk Disclosure in Emerging Countries

The study examines the influence of corporate governance attributes on the corporate risk disclosure in the emerging countries. Board size, non-executive directors, independent directors, board diversity and CEO-duality are the important board of director’s composition that is considered as corporate governance variables for this study. The study focuses on South Africa and Nigeria as these countries are among major players in the African emerging market. The sample comprises 42 financial and non-financial firms listed in Nigerian Stock Exchange and Johannesburg Stock Exchange. The data was drawn from 192 annual reports for the year 2014–2018. The analytical tools employed are manual content analysis and regression. The empirical results show that operational risk disclosure outweighs environmental and strategic risk disclosure. Meanwhile, past information, non-monetary and good news are considered less relevant, however dominatefuture, monetary and bad news which are more valuable to diverse stakeholders. Moreover, in considering the important factors that impact on the risk confession, that board size, independent director and diversity have greater influence in driving the risk disclosure upward. Nevertheless, non-executive director and CEO-Duality are statistically insignificant in determining the movement of risk information to divulge. The persistence of contemporary corporate risk practice jampacked with irrelevant information might promote greater agency cost. The implication for the current practice might increase investors’ uncertainty which in turn would raise the company cost of capital. This issue could be addressed by regulating risk disclosure in emerging countries instead of allowing corporate managers to report risk related information at their discretion. Corporate manager are also encourage to appreciate all the potential risk disclosure drivers in the African emerging countries.

Corporate Governance and Operational Risk Disclosure: Evidence from Shariah-Compliant Companies in Malaysia

This study aimed to examine the level of operational risk disclosure among Shariah-compliant companies in Malaysia. The relationship between corporate governance characteristics and operational risk disclosure was also examined by focusing on board characteristics, i.e. independent directors, audit committee meetings, Muslim directors, women directors and education levels of the directors. The sample comprised of 285 Shariah-compliant companies listed in the ACE Market of Bursa Malaysia for the financial years 2014 to 2018. The study used content analysis to assess operational risk disclosure. The information disclosure was scored using an adapted disclosure index. Findings revealed that the disclosure of operational risk information in Shariah-compliant companies was at a moderate level, specifically not more than sixty per cent. More importantly, the analysis showed a positive significant relationship between a woman director and operational risk disclosure. However, a negative significant relationship was found between Muslim directors and operational risk disclosure. Other independent variables were found to have no relationship with the operational risk disclosure. The findings may provide future researchers and regulators with references for assessing the level of operational risk disclosure among public listed companies in Malaysia and are expected to deliver some improvement in examining other characteristics to strengthen the governance practices in Malaysia. Keywords: operational risk disclosure, women director, Muslim director, Shariah-compliant companies