The Effect of Risk Disclosure on Investment Efficiency: An Applied Study

Abstract

The purpose of the research: This study aims to investigate the effect of corporate risk disclosure (RD) on investment efficiency in the Egyptian environment. Data and materials and methodology: The researcher conducts an applied study using a sample of 376 firm-year observation from Egyptian firms listed on EGX100 after excluding the banking sector and insurance companies due to their special accounting nature in the time period 2017-2022 in order to avoid the negative effects of inflation in the Egyptian market. The researcher uses content analysis to calculate a risk disclosure index (RDI) from annual reports and studies how it impacts the efficiency of investment in companies. Results: The results demonstrated a significant positive effect of RD on investment efficiency, where RD decreases the underinvestment and increases the overinvestment which leads in sum to more investment efficiency. These results are consistent with some of the theories and previous studies that confirmed the role of RD in enhancing investment efficiency. Keywords: Risk disclosure- Investment Efficiency- Overinvestment- Underinvestment.