Abstract
This study examines the degree of the corporate risk disclosure and its impact on the banking performance using annual data of banks listed on the UAE financial markets: Abu Dhabi Stock Exchange (ADX) and Dubai Financial Market (DFM) during the period 2003–2013. The authors conduct the content analysis of the annual reports to measure the degree of the corporate risk disclosure. In addition, they use the panel data regressions to analyze the impact of the corporate risk disclosure on the performance of the banks. The results show low degree of the overall corporate risk disclosure index, strategic risk disclosure index, operational risk disclosure index, damage risk disclosure index, and risk management disclosure index for UAE listed banks. In addition, the results reveal significant differences in the overall corporate risk disclosure, strategic risk disclosure, financial risk disclosure, and risk management disclosure between conventional and Islamic banks. However, the effect of the degree of the overall corporate risk disclosure on the performance of UAE bank has been found insignificant. The findings of this paper contribute by providing a better understanding of risk disclosure practices in UAE and help the banks to optimally disclose their risk, improve the quality of their disclosure practices and enhance the quality of their financial reports. The impact of the corporate risk disclosure on the performance of the banks has not been examined by any of the prior researches. In addition, this paper examines the potential difference between Islamic and conventional banks in their corporate risk disclosure practices.
Highlights
In last few years, the corporate risk disclosure (CRD) in the annual reports has growingly attracted the interest of the researchers and practitioners
This study examines the degree of the corporate risk disclosure and its impact on the banking performance using annual data of banks listed on the UAE financial markets: Abu Dhabi Stock Exchange (ADX) and Dubai Financial Market (DFM) during the period 2003–2013
We explore the extent of the corporate risk disclosure and examine its impact on the banking performance using annual data for listed banks on the UAE financial markets during the period 2003–2013
Summary
The corporate risk disclosure (CRD) in the annual reports has growingly attracted the interest of the researchers and practitioners. It has been long argued that the risk disclosure is associated, among others, to the improvement of the corporate risk management (ICAEW, 2002), the reduction of the information asymmetry (Linsmeir et al, 2005), the minimization of the agency costs (Uddin & Hassan, 2011), the protection of the investors (Linsley & Shrives, 2005) and the enhancement of the company’s reputation (Yang, 2007). All the companies are advised to disclose their risk in order to enhance the transparency of their financial reports, improve their disclosure quality and help the current and the potential investors in their proper assessment and economic decisions. There are many studies exploring the extent of the CRD such us: Robb et al (2001) in Anglo-America (Australia, Canada and US), Beretta and Bozzolan (2004) in Italy, Mohobbot (2005) in Japan, Lajili and Zeghal (2005) in Canada, Korosec and Horvat (2005) in Slovenia, Linsley et al (2006) and Abraham and Shrives (2014) in UK, and Amran et al (2008) and Ismail et al (2013) in Malaysia, Vandemele et al (2009) in Belgium, Oliveira et al (2011) in Portugal and Dobler et al (2011) in US, UK, Canada and Germany.
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