The risk–ESG nexus: examining how corporate risk disclosures influence ESG reporting in UAE companies

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.

Corporate Risk Disclosure of Islamic and Conventional Banks

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.

This paper investigates non-financial reporting in non-profit organisations. Specifically, it examines the extent to which UK higher education institutions (HEIs) make voluntary disclosures relating to risk management practices, and investigates whether composite governance quality index and senior management team characteristics can influence such risk disclosures. Using a sample of UK HEIs over a number of years and drawing insights from neo-institutional theory, our findings are three-fold. First, our baseline findings contribute to the literature by showing that the level of risk disclosure among HEIs in the UK is relatively low, especially when compared to the findings of prior studies that have been conducted on similar-sized publicly traded corporations. Second, we contribute to the literature by providing timely evidence on the impact of governance quality on risk disclosure. In particular, our evidence contributes to the existing literature by demonstrating that better-governed HEIs tend to engage in higher risk disclosures than their poorly-governed counterparts. Finally, our study contributes to the extant literature by providing new evidence that offers support for the “shared” governance model among UK HEIs. Specifically, our findings show that the positive governance quality–risk disclosure relationship is moderated/explained largely by the characteristics of the senior management team. Our findings are robust to controlling for endogeneities and alternative estimation techniques, with major implications for non-financial reporting. HIGHLIGHTS This paper examines non-financial reporting (NFR) in non-profit organisations, with specific focus on risk disclosures by UK higher education institutions (HEIs) We examine the effect of UK HEIs' governance quality on the level of risk disclosures; We investigate whether management team characteristics moderate the governance quality-risk disclosures nexus in UK HEIs We find that better-governed UK HEIs tend to engage in higher levels of risk disclosures We show further that the positive governance quality-risk disclosure relationship is moderated/explained largely by the characteristics of the senior management team

Does Risk Disclosure Reporting Quality Reduce Credit Risk?

Value Relevance of Voluntary Risk Disclosure Levels: Evidence from Saudi Banks

The paper develops a framework to explore the risk disclosure practices of 29 Islamic banks operating in the Gulf Cooperation Council countries over the period of 2013-2016 and examines the potential factors which might be affecting risk disclosure. To analyze the level of risk disclosure, the paper develops a composite index by using the content analysis technique. We also employ OLS technique to examine factors affecting Islamic banks’ risk disclosure. The results indicate a very high difference in risk disclosure between countries. Only two countries, the United Arab Emirates and Bahrain, have a higher level of risk disclosure. The findings also suggest that reporting on some risk disclosure types especially displaced commercial risk and rate of return risk is very low. The regression results show that Islamic banks with a stronger set of corporate governance mechanisms and an active Shariah board appear to disclose more risk information. Other factors that influence risk disclosure practices of Islamic banks are bank size, leverage, cross-border listings and the level of political and civil regression. The study recommends that Islamic banks have to revise their communication strategies and provide more risk information related to rate of return risk and display commercial risk. In addition, GCC regulators should establish risk disclosure regulations which have to become mandatory for all Islamic banks. To the best of our knowledge, the paper provides the first analysis related to the determinants of corporate risk disclosures of Islamic banks in the Arab Gulf region.

Purpose This paper aims to investigate whether risk-related information is associated with a higher level of performance disclosure (PerfD) in the annual reports during the Covid-19 pandemic. Additionally, this paper assesses if ownership structure plays a moderating effect on the relationship between RD and PerfD. Design/methodology/approach A content analysis technique to measure the risk information and PerfD for 72 listed firms in the Abu Dhabi stock exchange and Dubai financial market for the period 2019–2021. Findings The authors find a significant correlation between risk disclosure and PerfD. Indeed, managers use annual reports to send a signal to the market about their abilities and skills in managing high-risk situations by disclosing more performance-related information accompanying any communicated related risk information. Besides, our results report that before the pandemic, only government ownership had a significant effect on the level of disclosure of performance-related information. However, during the pandemic, foreign ownership also played an important role to improve firm transparency. In addition, during the pandemic, Big 4 audit firms have effective quality control, and auditors would play an important role in improving the quality of disclosure. Besides, leveraged firms report more performance-related information. A high level of PerfD may play a critical role in mitigating debtholders’ concerns about firm’ ability to manage the pandemic situation and generate enough cash flows in the future to pay their debts. Originality/value This paper’s findings are highly relevant to financial reporting’ users, mainly shareholders, as they will be aware about management behaviors during the crisis and how firms are engaged in disclosure. Besides, this paper’s findings may be useful for market regulators to reinforce the role of audit quality to maintain good reporting, especially in crisis circumstances. In addition, regulators may benefit from the findings through the optimization of the ownership structure (dispersed ownership), which helps to promote transparency and disclosure.

ABSTRACTThis study examines the impact of multi-layer governance mechanisms on the level of bank risk disclosure. Using a large dataset from 14 Middle East and North Africa (MENA) countries over a period of 8 years, our findings are three-fold. First, our results suggest that the presence of a Sharia supervisory board is positively associated with the level of risk disclosure. Second and at the bank-level, we find that ownership structures have a positive effect on the level of risk disclosure. At the country-level, our evidence suggests that control of corruption has a positive effect on the level of bank risk disclosure. Our study is, therefore, a major departure from much of the existing accounting literature that offers new crucial insights that show that firms’ disclosure choices are not mainly shaped by firm-level (internal) governance arrangements, but also country-level (external) governance and religious factors. Our findings have important implications for corporate boards, investors, regulatory authorities, standards-setters and governments relating to the development, implementation and enforcement of corporate and national governance standards.

Islamic banks operate in a different manner from conventional banks, particularly in adopting profit loss sharing contracts, resulting in arguably different risks and profitability profiles. Drawing from the Islamic principle of full disclosure, stakeholder and signalling theories, this research examines whether there is a relationship between risk, profitability measures and the level of risk disclosure. Using a sample of Islamic banks in Asia, the Middle East and Europe for the period between 2006 and 2009, the results from a panel data analysis confirm a positive association between return on equity and risk disclosure. There is modest evidence of a negative association between risk (as measured by leverage and proportion of loan to total asset) and risk disclosure. The results generally support the signalling theory rather than the stakeholder theory. A major policy implication is that risk disclosure should be mandatory as voluntary disclosure cannot be expected.

PurposeThis study aims at examining the level of risk of disclosure practices and the effect of four board of directors' characteristics (board size, board meetings, CEO duality and board expertise) on these practices in the Jordanian context. This study also adds to the body of literature by examining the moderating effect of family ownership on the relationship between the board of directors' characteristics and the corporate risk disclosure.Design/methodology/approachThe sample of this study contains the non-financial Jordanian firms listed on Amman Stock Exchange (ASE). 376 annual reports of the sampled firms over four years from 2014 to 2017 were used. The content analysis approach was used to collect data and to determine the level of risk disclosure by computing the number of risk-related sentences in the annual reporting. To test the study's hypothesis, the random effect model was employed.FindingsThe empirical results show that the total of the risk disclosure sentences for each firm ranges from a minimum value of 2 sentences to a maximum value of 61 sentences, and the mean of CRD is 28 sentences. The results also indicate that the board expertise is positively related with the level of risk disclosure. Conversely, CEO duality has a negative impact on the risk disclosure practices. However, the results failed to support that the board size and the board meetings have a significant effect on the level of risk disclosure. Furthermore, the study demonstrated that the family ownership moderates the relationship between the board of directors and the corporate risk disclosure.Practical implicationsThe finding of this study is more likely be useful for many concerned parties, researchers, authorities, investors and financial analysts alike in understanding the current practices of the risk disclosure in Jordan, thus helping them in reconsidering and reviewing the accounting standards and improving the credibility and transparency of the financial reports in the Jordanian capital market.Originality/valueThe current study contributes to the literature of risk disclosure because the previous research has paid little attention to this topic in Jordan. To the best knowledge of the researcher, this study is the first Jordanian study that focuses on examining the relationship between the board of directors' characteristics and the corporate risk disclosure in the non-financial sector. Furthermore, it is the first study that examines the moderating role of family ownership on such relationships. Consequently, the results of the current study draw attention to the CRD practices and the monitoring role of board of directors in Jordan.

Abstract: This research aims to examine the determinants of risk disclosure level of public listed firms in Indonesia Stock Exchange. Risk disclosure level is divided into three types, i.e., mandatory, voluntary, and total risk disclosure. The results show that generally firm size and product or service diversification has a positive effect on risk disclosure level, whereas geographic diversification positively affects only voluntary risk disclosure. Based on industry type, firms in certain sectors such as infrastructure, mining, agriculture, and property, have a higher level of risk disclosure than miscellaneous industries. Abstrak: This research aims to examine the determinants of risk disclosure level of public listed firms in Indonesia Stock Exchange. Risk disclosure level is divided into three types, i.e., mandatory, voluntary, and total risk disclosure. The results show that generally firm size and product or service diversification has a positive effect on risk disclosure level, whereas geographic diversification positively affects only voluntary risk disclosure. Based on industry type, firms in certain sectors such as infrastructure, mining, agriculture, and property, have a higher level of risk disclosure than miscellaneous industries.

PurposeThis study aims to empirically examine whether the political connection is related to risk disclosure practices. The study also seeks to contribute to the existent risk disclosure literature by investigating the moderator effect of family ownership on this relationship.Design/methodology/approachThe content analysis approach was used to collect data and determine the level of risk disclosure over the non-financial Jordanian firms listed on 1Amman Stock Exchange. The sample of this study contains 376 annual reports over four years from 2014 to 2017. It used the random effect regressions to examine the hypothesis of the study.FindingsThe results show that politically connected companies disclose less risk information than the unconnected ones in Jordan. The results also refer that family ownership contributes in mitigating the negative effect of the political connection on the level of corporate risk.Practical implicationsThe results have implications for regulatory institutions such as the Jordan Securities Commission to take the negative effect of political connection in their consideration and impose further regulations to monitor this board’s attribute and control politicians’ domination on the board decisions.Originality/valueThe current study also contributes to the body of literature by investigating the effects of the political connections on the level of risk disclosure in the financial reports. To the best of the authors’ knowledge, the current study is the first to examine the effect of the political connection on the risk disclosure practices. Moreover, the study is among the first studies that examine the moderating role of family ownership on such relationship.

This study contributes to the existing risk disclosure literature in emerging economies, in particular Saudi Arabia (SA), by examining the levels of risk disclosure in the annual reports of both Islamic and non-Islamic listed banks. This investigation uses a manual content analysis method to examine all Saudi listed banks from 2009 to 2013. This study also develops two holistic risk disclosure indices to measure the levels of risk disclosure in both Islamic and non-Islamic banks. The empirical analysis shows that Islamic banks report less risk information than non-Islamic banks. However, the analysis also reveals that both Islamic and non-Islamic banks report relatively the same amount of risk information regarding the banks’ universal items. Furthermore, the empirical analysis shows that Islamic banks report very low risk disclosure items. The study’s findings have practical implications. They inform the regulators about the current level of risk disclosure in all Saudi listed banks (Islamic and non-Islamic). For example, the findings show that Islamic banks report less risk information than their non-Islamic counterparts. The practical implications for managers from these findings are that in order to keep investors satisfied, banks with low levels of risk disclosure should enhance their reporting practices. This will help investors when making investment decisions. To the best of the researchers’ knowledge, no prior research has previously been conducted on the levels of risk disclosure in Saudi Arabian listed banks. Therefore, this is the first study to examine the levels of risk disclosure in the context of Saudi Arabia.

PurposePrevious works assessing the determinants of banks’ risk disclosure in emerging economies focused on one aspect of risk reporting such as market risk disclosure or operational risk disclosure. While banks’ transparency about other major risk types (e.g. capital adequacy, liquidity risk…) is important for both market discipline and for their financial stability, no previous research has tried to discuss their determinants for Islamic banks. This paper aims to fill the gap by assessing the effects of deposits structure and ownership concentration on risk disclosure for Islamic banks.Design/methodology/approachThe authors based on a sample of 71 Islamic banks operating in 12 emerging economies and observed over the period 2009–2014. The authors used a risk disclosure index covering nine dimensions, and the authors used both generalized least squares (GLS) regression and generalized method of moments (GMMs) as econometric tools.FindingsThe findings suggests that the level of risk disclosure is lower for Islamic banks with higher ownership concentration, leveraged bank, listed banks and Islamic banks. However, risk disclosure is higher for Islamic banks with higher concentration of profit sharing investment account (PSIA) and higher foreign ownership, large Islamic banks, aged banks, Islamic banks operating in country with higher country transparency index, positively correlated to gross domestic products and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) adoption. By disaggregating total risk disclosure into the nine sub-categories, the authors are able to specify, also, the components of risk disclosure impacted by various determinants.Research limitations/implicationsThis paper’s findings are subject, also, to a number of limitations. First, there was manual scoring of annual reports (subjectivity). Second, while some items might have higher information content or be more useful than others for users of Islamic banks’ annual reports, no weighting is assigned to items. Third, the research focuses exclusively on the 12 countries and excludes the other Middle East, Southeast Asia and Far East countries where ownership structure and deposits structure might affect risk disclosure differently.Originality/valueThe findings suggest many policy implications. First, regulators have to improve corporate governance mechanisms in Islamic banking system through the optimization of ownership structure (dispersed ownership) to promote transparency and disclosure. Second, regulators and policymakers should revise guidelines in the main purpose to protect PSIAs holders (considered as minor shareholders without voting power) through promoting disclosure and transparency. Third, the findings can be useful for many international supervisory bodies such as the IFSB and AAOIFI to evaluate transparency and disclosure standards.