Abstract

This study aims to measure the risk disclosure level in Egyptian banks and to investigate its determinants. The sample consisted of 28 banks during the period from 2010 to 2017. An unweighted risk disclosure index including six categories was used: credit risk, market risk, liquidity risk, capital structure and adequacy risk, operational risk, and other non-financial risks. Also, a content analysis approach was used to measure the actual level of risk disclosure. The findings demonstrated that there was an average level of total risk disclosure of all sample banks. The results showed that banks with a higher percentage of independent board membership, large board size, large audit committee size, duality, higher institutional ownership, and banks audited by one of big four audit firms were more motivated to increase risk disclosure. Also, the results showed that leverage, bad news, and bank social responsibility have a negative relationship with the level of risk disclosure. Overall, the results indicated that leverage, board size, audit committee size, auditor types, independence, duality, institutional ownership, bank social responsibility, and bad news are the main factors affecting the level of risk disclosure in Egyptian banks. The findings of this paper have a number of important implications. The risk disclosure in the banking sector is important for stakeholders such as investors and depositors. Also, risk disclosure index helps the regulatory bodies to evaluate the risk disclosure practice in Egyptian banks. This paper contributes to analyzing factors affecting banks managers’ decision to disclose risk information in emerging countries such as Egypt.

Highlights

  • The results indicated that leverage, board size, audit committee size, auditor types, independence, duality, institutional ownership, bank social responsibility, and bad news are the main factors affecting the level of risk disclosure in Egyptian banks

  • Many professional organizations, regulatory bodies, international organizations, and standard setters such as the Basel Committee on Banking Supervision (BCBS), the Financial Stability Board (FSB), the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have required the banking sector to improve the level of risk disclosure as a result of a number of factors

  • R-squared are 0.53 and 0.49, respectively. This means that the applied independent variables the findings indicate that duality is explain about 50% of the risk disclosure level in associated positively with bank risk disclosure at the 0.05 significance level

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Summary

INTRODUCTION

Many professional organizations, regulatory bodies, international organizations, and standard setters such as the Basel Committee on Banking Supervision (BCBS), the Financial Stability Board (FSB), the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have required the banking sector to improve the level of risk disclosure as a result of a number of factors. Most previous studies have focused on measuring efficiency Some studies found that tion to any opportunity, prospect, hazard, harm, there was a positive association between the bank threat, danger or exposure, which has an effect on size and the level of risk disclosure (Linsley et al, the company or may affect the company in the fu- 2006b; Savvides & Savvidou, 2012; Nahar et al, ture or of the management of any such opportunity 2016b). Risk there was no association between the bank size disclosures include “any information published and the level of risk disclosure (Anagnostopoulos within the annual report that provides qualitative & Skordoulis, 2011; Aryani & Hussainey, 2017). The following hypothesis is tested: H5: There is a significant association between the

Leverage board size and the level of risk disclosure in
Audit Committee
Ownership structure
1.13. Bad news
METHODOLOGY
Correlation matrix
RESULTS
Basel Committee on Banking
A Theoretical Consideration

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