Abstract
PurposeThis paper aims to examine the impact of board governance quality (BGQ) and its mechanisms, namely board activity, board independence, board communication and board expertise, on the level of risk disclosure compliance (RDC) among financial institutions (FIs) in Uganda.Design/methodology/approachThe study adopts a cross-sectional design where data are collected through a questionnaire survey and audited financial statements of 83 FIs. The authors employ partial least square structural equation modeling (SmartPLS32.7) to test hypotheses.FindingsThe authors find that the level of RDC in Ugandan FIs is low. Further, the study finds the positive relation between BGQ and RDC. Moreover, the authors find that RDC is positively and significantly related with board activity, board independence, board communication and board expertise. Furthermore, the authors find that the level of RDC is positively and significantly related to ownership type, firm size and board size, respectively. Nevertheless, industry type, number of branches and firm age are insignificantly related to RDC.Practical implicationsThe study provides relevant insights into regulators and policy makers with early symptoms of potential problems regarding weak board governance in FIs. Policy makers may also use these findings as a guideline tool for improving existing board governance frameworks in place and development of new disclosure policies. In addition, the study provides an input into the review and amendments of existing corporate governance codes for the regulators.Originality/valueThis study offers the empirical evidence on the nexus between BGQ and RDC of FIs in Uganda. Moreover, the study also offers evidence on how BGQ mechanisms impact RDC. The study also further adds theoretical foundations to the RDC literature.
Highlights
Risk disclosure compliance (RDC) is important to all organizations in developed and developing economies
The main purpose of this study was to examine whether the board governance quality (BGQ) mechanisms have a significant impact on RDC in Uganda
The findings of descriptive statistics indicate that that overall level of RDC in Ugandan financial institutions (FIs) is low
Summary
Risk disclosure compliance (RDC) is important to all organizations in developed and developing economies. RDC brings about transparency through adhering with available risk regulations and improving quality of risk information (IASB, 2010). This paper examines the relation between board governance quality (BGQ) and RDC in Uganda. Empirical evidence in Uganda shows that RDC with the International Financial Reporting Standards (IFRS) requirements is still low (Nalukenge et al, 2018; Nalukenge, 2020). The COSASE report (2018) indicates compliance with IFRS 7 risk disclosure requirements is low especially with seven defunct banks. The Supervision report (2017) shows that some banks misreport their data submitted in as statutory returns and to credit reference bureau. The question that arises is whether BGQ is an important determinant of RDC in Uganda
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