Abstract
This paper examines the relationships between corporate governance variables and the extent of risk disclosures among listed companies in Kenya. The study aims to empirically examine the relationship between corporate governance variables and risk disclosures in 48 listed non-financial companies in Kenya. Content analysis of annual reports for the period 2010-2016 was used to measure the level of risk disclosures and compute the risk disclosure index for each company studied. The relationships between variables were analysed using panel data analysis. The findings show that the percentage of non-executive directors, ownership dispersion, percentage of foreign ownership, women in boards affected significantly the level of risk disclosures in the studied companies. Additionally, the control variables, firm’s size and firm’s profitability also significantly affected the level of risk disclosures. It can be concluded that the agency theory and the signalling theory can be used to explain the risk disclosure behaviours of listed firms in Kenya. It is recommended that companies should strengthen their corporate governance mechanisms in order to deal with risks facing them. Key words: Risk disclosures, corporate governance, agency theory, signalling theory, non-financial sectors.
Highlights
The concepts of corporate governance and corporate risk management are becoming increasingly intertwined as risk management continues to be embraced by many organisations
The results of the regression model indicate a significant relationship between the dependent variable and the corporate governance attributes (Table 2)
The R2 of 0.872 suggests that corporate governance variables included in the model largely explain the variance in risk disclosures
Summary
The concepts of corporate governance and corporate risk management are becoming increasingly intertwined as risk management continues to be embraced by many organisations. Corporate risk management is considered as a key aspect of corporate governance. Regulatory authorities are requiring that firms disclose what they are doing to manage risks so that stakeholders are properly informed. Grown to be recognised as important information to include in the annual reports of firms (Lajili, 2009; Saggar and Singh, 2017). Many studies have been done on the relationship between corporate governance and voluntary disclosures, social responsibility disclosures, and environmental disclosures (Barako et al, 2006). There has been limited research on the association between corporate governance and risk disclosures. This is so in the emerging markets.
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