Abstract
Abstract This study aims to measure the degree of operational risk disclosure and examine its impact on operating cash flow of banks listed on the UAE Abu Dhabi Stock Exchange (ADX) and Dubai Financial Market (DFM) during the period 2003-2016. The authors conducted content analysis of the annual reports to measure the degree of operational risk disclosure. In addition, they used dynamic panel data regressions to analyze the impact of operational risk disclosure on the operating cash flow generated by the banks. The results show a low degree of operational risk disclosure for all UAE banks, both Islamic and conventional. In addition, the results show no association between the levels of disclosure of operational risk and cash flow for all banks, conventional and Islamic. Operational risk disclosure of Islamic banks has not been examined by any prior researchers. In addition, this paper examines the potential impact of operational risk disclosure on the operating cash flow generated by the banks.
Highlights
The banking system plays a dynamic role in every economy, has a central impact on overall economic performance, and had a major involvement in the extensive financial crisis (Kabir, Worthington, & Gupta, 2015)
This study aims to explore the extent of operational risk disclosure in the annual reports of banks and examine its potential effect on operating cash flow generated by all United Arab Emirates (UAE)-listed banks, and that by UAE Islamic banks and conventional banks
We present below our descriptive statistics and estimation results concerning levels of operational risk disclosure of all, Islamic and conventional UAE banks for the period 2003-2016
Summary
The banking system plays a dynamic role in every economy, has a central impact on overall economic performance, and had a major involvement in the extensive financial crisis (Kabir, Worthington, & Gupta, 2015). Hassan (2009) examines the relationship between UAE corporations-specific characteristics (size, level of risk, industry type and reserves) and the level of corporate risk disclosure by using a sample of 49 companies for 2005. In the same context, Hassan (2014) explores the extent of the narrative risk disclosure in 23 annual reports of UAE financial institutions for 2008 and examines how societal expectations of the UAE stakeholders are related to risk disclosures. His results show that the UAE financial institutions use their risk disclosure to gain, maintain and restore their social legitimacy
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