Risk Disclosure Research Articles

INFORMATION ASSET PROTECTION IN ACCOUNTING: ANALYZING CORPORATE GOVERNANCE AND RISK MANAGEMENT THROUGH A BIBLIOMETRIC LENS

This paper deals with the protection of information assets related to accounting, based on bibliometric analysis involving 333 articles from the Web of Science. The five clusters that had been targeted by this research included: Corporate Governance and Board Characteristics (Cluster 1); Financial and Performance Metrics (Cluster 2); Accounting Standards and Reporting (Cluster 3); Risk Management and Disclosure (Cluster 4); Information Quality and Investor Protection (Cluster 5). It aims to define the current boundaries of the literature, identify main tendencies, and give a view on the future course of research. Bibliometric and content analysis methods were applied in the study to certain articles, and the relevance and impact were identified by the data obtained in the period between the years 2007–2024. Consequently, this chapter presents a broad-based analysis of how corporate governance ensures and drives information protection, the presentation of financial metrics internally within the organization, the importance of accounting standards, and the effectiveness of risk management and disclosure practices. The findings shall add to the better understanding of researchers, practitioners, and policy-makers in developing the protection of information assets in the accounting area.

How It Matters Who Makes Corporate Rules

AbstractCorporate rules are often analysed without attending to the strengths and limitations of the body making, monitoring or implementing those rules. However, corporate rule-making and implementation bodies (RMIBs) over which policymakers have the most influence—legislatures, public regulatory agencies, stock exchanges, and private/professional bodies with a degree of self-regulatory autonomy—have an important bearing on the effectiveness of rules. This article advances a framework to understand how RMIBs influence the effectiveness of corporate rules by critically examining five core features of RMIBs: (a) their incentives for making and implementing the rules; (b) the nature and extent of regulatory competition; (c) available and relative resources; (d) rule-making speed and the certainty of their decisions; and (e) their legitimacy in the eyes of the regulated parties and relevant stakeholders. To illustrate the framework concretely, this article conducts case studies exploring how it matters who makes the rules on climate-related risks disclosure and in the UK’s recently enacted Financial Services and Markets Act 2023.

Risk disclosure, earnings smoothing and firm perceived risk

Purpose This paper aims to examine the association between perceived firm risk and two reporting mechanisms: risk disclosure and earnings smoothing in the UK context. Design/methodology/approach This study juxtaposes three competing views, the “null”, the “divergence” and the “convergence” hypotheses, and empirically investigates whether risk disclosure and earnings smoothing affect firm perceived risk for a sample of large UK firms with rich and poor information environments. This study also uses the global financial crisis as an external shock on overall risk in the economy to investigate when and how managers use these two reporting mechanisms to shape the firm perceived risk. Findings This paper documents that risk disclosures have no significant effect on investors’ risk perceptions, consistent with risk disclosures containing boilerplate and generic statements about firm risk. This paper also finds that earnings smoothing reduces investors’ risk perceptions, reflecting investors’ interpretations about future firm performance. Additional tests reveal that earnings smoothing is not associated with perceived firm risk for firms with rich information environments and expanded risk disclosures. Furthermore, reporting smooth earnings decreases perceived firm risk following the global financial crisis. These findings are robust to alternative specifications and measures of earnings smoothing as well as post-filing perceived firm risk. Research limitations/implications This study does not distinguish between the garbling role and the informational role of earnings smoothing. The risk disclosure measurement used in this study, developed based on UK annual reports, may limit the generalizability of findings to other countries. Practical implications The findings suggest that managers should revise their risk disclosure strategies to provide in-depth details on firm risk. Investors might require information and thorough assessment to evaluate investment risks when firms provide generic risk disclosures and smoothed earnings by consulting sources like financial intermediaries. Regulators should keep an eye on firms reporting boilerplate risk disclosures and on how smoothing earnings impacts the firm perceived risk following economic turmoil, to guide interventions that promote market stability. Originality/value The findings provide new insights into when and how managers use their financial reporting discretion to make firms appear less risky and, therefore, influence investors’ risk perceptions.

Knowledge-Driven Data Sharing Governance: Developing a data provenance model for constructing context-aware data sharing frameworks for linkage data within the All of Us Research Program.

Health data access and sharing in the U.S. have been hindered by complex privacy and security conditions, limiting research and improvement of health outcomes. This challenge is even greater in minority and sensitive populations - who would benefit most from integrative research. The All of Us Research Program is a National Institutes of Health funded initiative aiming to enhance health research through the analysis of lifestyle, environment, and genetics data from over one million participants, with a focus on communities historically underrepresented in biomedical research. The program is enhancing the utility of data by incorporating passive data streams, such as claims, electronic health records (EHRs), environmental, geocodes, mortality, and residential history. Further, through the use of national health information exchange standards, All of Us also aims to address technical challenges in linking EHRs from health information networks to deliver a more complete longitudinal participant record. However, such an initiative necessitates a thoughtful approach through data awareness, advancing data access in ways that preserve individual privacy while increasing scientific utility. Here, we describe our privacy-preserving record linkage (PPRL) and data privacy risk disclosure control strategy, emphasizing fit-for-purpose data provisioning. Our knowledge-driven data ecosystem architecture leverages a combination of PPRL, data provenance, and geocoding at multiple levels to support context-aware data sharing granular access control.

Idiosyncratic risk disclosure of IPO firms and institutional investors' withdrawals

Idiosyncratic risk disclosure of <scp>IPO</scp> firms and institutional investors' withdrawals

Who gains favor with green investors amidst climate risk?

PurposeThis study aims to investigate the impact of climate risk disclosure by listed companies on the entry of green investors. It seeks to understand how proactive climate risk disclosure can attract green investment and the underlying mechanisms that facilitate this process.Design/methodology/approachTextual analysis is employed to assess the extent of climate risk disclosure in annual reports. The research constructs indicators for green investor entry and applies regression analysis to examine the relationship between climate risk disclosure and green investment, considering various mediating variables such as positive online news coverage, ESG scores, and corporate reputation.FindingsGreen investors are more likely to invest in companies with higher levels of climate risk disclosure. This relationship is robust across different types of firms, with non-state-owned, non-high-tech, large-scale firms, and those in the Eastern region showing a stronger attraction to green investors. Climate risk disclosure promotes green investment through the “signal transmission” mechanism, enhancing corporate reputation and ESG performance.Originality/valueThis paper extends the traditional theory of external incentives for corporate green development to include autonomous incentives through active climate risk disclosure. It provides new insights into the theory of corporate sustainable development and offers practical recommendations for enhancing corporate green development pathways. The study’s comprehensive approach and use of extensive data contribute valuable knowledge to the field of green investment and corporate sustainability.

Do CEOs’ characteristics affect compliance with IFRS 7 risk disclosure requirements?

Do CEOs’ characteristics affect compliance with IFRS 7 risk disclosure requirements?

The audit committee’s IT expertise and its impact on the disclosure of cybersecurity risk

This paper examines the impact of the audit committee's IT expertise on corporate cybersecurity risk disclosure against the backdrop of increasing complexity and frequency of cyberattacks. We find that IT expertise of audit committees significantly improves the disclosure of cybersecurity risks. This effect is more pronounced in firms with less transparent financial reporting, firms with weaker governance, and firms with lower information asymmetry. Furthermore, the level of artificial intelligence adoption, the quality of internal controls, and the quality of information disclosure are potential influencing channels.

Impact of audit committee characteristics on risk disclosure: evidence from the banking sector of Pakistan

Impact of audit committee characteristics on risk disclosure: evidence from the banking sector of Pakistan

Accounting for modern slavery risk transparency in Nigerian businesses: Institutional context, disclosure and the way forward

This paper examines the state of engagement of Nigerian companies with modern slavery risk and how current accounting and reporting might be better enabled to contribute towards ending modern slavery practices. Crane's (2013) theoretical framework is used to guide understanding of the contexts behind modern slavery risk disclosure in Nigeria, including industry, socioeconomic, regulatory, cultural and geographic factors. Cross-sectional content and thematic analysis are undertaken, as published in the annual reports, sustainability reports and websites of top companies listed on the Nigerian Stock Exchange. In line with Crane (2013), supply chain codes of conduct and collaboration are identified as a possible first-stage intervention moderator between industry context and ending modern slavery in Nigeria. However, a second moderator, affordable micro-credit, is notably absent from disclosures, and a third moderator, private or civil regulators, as a substitute for government, is considered ineffective. Management capability mediators as circuit breakers, reducing accounting opacity, require further research. This is the first paper to present evidence about modern slavery supply chain risk disclosures in Nigeria and to develop possible contextual, moderating and mediating variables aimed at policies and actions to end modern slavery practices in Nigeria.

Value-Enhancing Effect of Climate Change Risk Disclosure by Firms: Empirical Evidence Based on Textual Analysis and Machine Learning

ABSTRACT This study utilizes textual data from the social responsibility reports of Shanghai and Shenzhen A-share listed companies in China between 2007 and 2019. Through the application of textual analysis and machine learning technology, an index is constructed to gauge the extent of climate change risk disclosure by corporations. The paper examines the impact of climate change risk disclosure on corporate value, drawing from theoretical reasoning and empirical evidence.The findings reveal a significantly positive relationship between corporate climate change risk disclosure and corporate value, indicating the existence of a value promotion effect. Mechanism tests demonstrate that firms’ climate change risk disclosure enhances corporate transparency by attracting attention from analysts and the media. Consequently, this reduces information asymmetry and fosters an increase in corporate value. Furthermore, the study highlights that non-state-owned and high-polluting corporations exhibit a more pronounced value enhancement effect from climate change risk disclosure compared to other corporations. Additionally, corporations with highly readable and positively-toned textual information experience stronger value-promoting effects. These results provide robust empirical evidence supporting the practice of climate change risk disclosure among corporations in China.

Corporate culture's influence on the transparency of financial reporting in Iran: an in-depth analysis of readability and tone

PurposeThis study investigates the influence of corporate culture on financial reporting transparency within Iranian firms.Design/methodology/approachLeveraging a dataset of 1,480 firm-year observations from the Tehran Stock Exchange spanning from 2013 to 2022, the study employs text mining to quantify linguistic features of corporate culture and transparency, specifically readability and tone, within annual financial statements and Management Discussion and Analysis (MD&amp;A) reports.FindingsOur results confirm a positive and significant relationship between corporate culture and financial reporting transparency. The distinct dimensions of corporate culture — Creativity, Competition, Control, and Collaboration — each uniquely enhance financial transparency. Robustness tests including firm fixed-effects, entropy balancing, Generalized Method of Moments (GMM), and Propensity Score Matching (PSM) validate the profound influence of corporate culture on transparency. Additionally, our analysis shows that corporate culture significantly affects the disclosure of business, operational, and financial risks, with varying impacts across risk categories. Cross-sectional analysis further reveals how the impact of corporate culture on transparency varies significantly across different industries and firm sizes.Research limitations/implicationsThe study’s scope, while focused on Iran, opens avenues for comparative research in different cultural and regulatory environments. Its reliance on text mining could be complemented by qualitative methods to capture more nuanced linguistic subtleties.Practical implicationsFindings underscore the strategic importance of cultivating a transparent corporate culture for enhancing financial reporting practices and stakeholder trust, particularly in emerging economies with similar dynamics to Iran.Originality/valueThis research is pioneering in its quantitative analysis of the textual features of corporate culture and its impact on transparency within Iranian corporate reports, integrating foundational theoretical perspectives with empirical evidence.

Corporate governance impact on risk disclosure in Shariah-compliant financial firms of Kuwait

Purpose This study aims to investigate the relationship between corporate governance characteristics and risk disclosure in Shariah-compliant financial firms operating in Kuwait. It aims to provide insights into the factors influencing risk disclosure practices within these institutions. Design/methodology/approach The research used manual content analysis to quantify risk disclosure levels in the annual reports of 47 Shariah-compliant financial companies listed in Kuwait in 2020. Subsequently, multiple regression analysis was conducted to assess the impact of various corporate governance factors on the extent of risk disclosure. Findings The study reveals that while Kuwaiti Shariah-compliant firms exhibit limited risk disclosure in their annual reports, larger boards and committees, along with a higher number of independent directors, positively influence the level of risk disclosure. Interestingly, the size of the Shariah supervisory boards did not show a significant impact on risk disclosure practices. Practical implications These findings hold regulatory implications for Kuwait, highlighting the need to ensure information adequacy and promote market efficiency. Additionally, they offer practical insights for managers and investors seeking to optimize fund sourcing and diversify investment portfolios within the context of Shariah-compliant financial institutions. Originality/value This study contributes to the existing literature by providing empirical evidence on the relationship between corporate governance characteristics and risk disclosure in the specific context of Shariah-compliant financial firms operating in Kuwait. Furthermore, it identifies avenues for future research to delve into the influence of additional governance factors on risk disclosure practices within this unique financial landscape.

Do risk disclosures enhance the efficacy of regulatory and supervisory frameworks in restricting banks’ risk-taking?

This study examines the impact of stringent regulatory and supervisory frameworks, as well as enhanced risk disclosure practices, on banks’ risk-taking behavior. We analyze a sample of banks from twelve European countries (Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Netherlands, Poland, Spain, Sweden, and the United Kingdom) over the period from 2000 to 2020. Our findings demonstrate a significant decrease in banks’ inclination to engage in risky behavior when they are subjected to strict regulatory and supervisory frameworks, alongside increased disclosure of risk management practices. Moreover, the implementation of comprehensive risk disclosures, as a supplementary tool for banking regulation and supervision, effectively reduces banks’ tendency to engage in risky activities. The results of our study remain robust across various checks conducted for each hypothesis.

Reporting Corporate Risk: An Empirical Inquiry into Listed Entities in the Saudi Capital Market

A capital market with greater transparency provides more accurate metrics for measuring corporate performance, which can be utilized to inform market participants’ decisions. Informed risk is crucial to corporate reporting transparency. This empirical study explores the extent to which firms in the Saudi capital market disclose risk information, whether financial or non-financial. A risk disclosure index (RDI) is constructed based on a rigorous literature review of previous studies, considering suggested items related to corporate risk that must be disclosed. The sample comprises 50 corporations, with five companies representing the energy sector, three representing the utility sector, and forty-two representing the materials sector. The findings reveal moderate financial risk disclosure (sample mean 56%) and low non-financial risk disclosure (sample mean 33%) in the Saudi capital market. In the energy sector, the disclosed financial and non-financial risks comprise 57% and 37%, respectively; in the utility sector, these proportions are 56% and 31%, while in the materials sector, they are 54% and 33%, respectively. Regulators should prioritize high-quality, transparent, and comparable risk information disclosure to attract direct foreign investment. To improve their risk disclosure, managers of firms can also employ the RDI to examine the extent of risk their companies face. This study is limited to the annual and board reports of companies in the three sectors.

Narrative Tone and Facial Emotion Management of Risk Disclosure in Crowdfunding

Narrative Tone and Facial Emotion Management of Risk Disclosure in Crowdfunding

Uncovering the intensity of climate risk and opportunity: Awareness and effectiveness

This paper examines the effect of awareness regarding climate change risks and opportunities on the proactive carbon management systems of U.S. S&P 500 companies. We develop our hypotheses based on institutional theory, stakeholder theory, and prospect theory. Our findings indicate a significant positive association between our self-constructed measurement of company risk and opportunity awareness and carbon management practices. We observe that financially constrained firms exhibit a lesser response to both climate change risk and opportunity awareness. Additionally, we note that firms with low profitability are more responsive to climate change risks, whereas we found no evidence linking climate change opportunity awareness to carbon management systems, consistent with prospect theory. Finally, we investigate the impact of carbon management systems on carbon reduction performance to examine the effectiveness of such awareness. In summary, this study provides the first evidence of how awareness of climate risk and opportunity influences corporate carbon management practices in a U.S. setting. Our findings imply that awareness serves as the initial step in prompting positive actions to manage risks and capitalize on opportunities. These results offer novel insights and information relevant to the recent policy initiative aimed at transitioning climate risk disclosure from voluntary to mandatory.

Ownership Structure and Corporate Risk Disclosure in Emerging Countries

The study examines the impact of ownership structure on corporate risk disclosure in African emerging countries. The sample includes 42 firms that are listed on the Johannesburg Stock Exchange and the Nigerian Stock Exchange. The data for the independent variables were taken from the Bloomberg data stream, whereas the data for the dependent variable were taken from annual reports retrieved from the website of the sample companies. The study’s time period runs from 2014 to 2018. Regression and content analysis were employed as the analytical tools. We perform text analysis on company annual reports to ascertain the risks that companies disclose, and regression analysis was used to establish the extent to which ownership structure influenced corporate risk disclosure. The result shows that strategic and environmental risk disclosures are dominated by operational risk disclosure. It has become a convention for the firms to divulge considerable positive, past, non-monetary information rather than negative, future and monetary risk information. Moreover, it is discovered that the decision to improve risk disclosure is largely influenced by company size and profitability. In contrast, firms are reluctant to unveil risk information provided the shares of the company are not concentrated in the hands of few individuals. Nonetheless, company risk disclosure practice is unaffected by institutional investors, government, foreigners, insider ownership and leverage. It can be concluded that the enterprises operating in emerging African markets have made improvements totheir risk disclosure practices. However, there is still room for further improvement. Monetary, future, and negative risk information are the most important risk disclosures that various stakeholder groups, such as investors, demand to see. Hence, there is a need for regulation that can compel corporations to publish the most pertinent risk information. Even though risk disclosure is voluntary in these two African emerging countries, ownership structure is one of significant predictors of corporate risk disclosure.

Attitudes towards disclosure of familial genetic risk in a Mediterranean island population – A survey of the Maltese population

Germline genetic testing has implications that extend beyond the individual patient to relatives, particularly for high-penetrance variants implicated in hereditary cancer or neurodegenerative syndromes. Many countries encourage patient-led communication to inform at-risk relatives, although the efficacy and uptake of this approach varies. Alternative scenarios envisage direct contact mediated by clinicians. The familial disclosure of sensitive genetic information is also determined by complex socio-ethnic factors. To date, no study has explored whether relatives would want to be informed of familial genetic risk and their preferences on different methods of communication in Malta. We thus used a published instrument that utilizes hypothetical scenario methodology to survey the attitudes of the Maltese population (n = 334) to receiving genetic information from family members. Two vignettes on Huntington's disease and colorectal cancer were presented. We also explored preferences towards the communication of genetic risk, confidentiality, and disclosure policies. Our preliminary results show that most respondents want to be informed of their increased risk by a family member or a clinician and would opt to receive confirmatory genetic testing. Most respondents preferred being informed of genetic risk by a close relative, but in the case of non-disclosure would want to be informed by a clinician. Most respondents expressed preference in favour of the introduction of registries, legislative change and sharing of contact details to address cases of nondisclosure. Our findings contribute further to evidence that supports, in selected hypothetical scenarios, an envisioned change in disclosure of genetic data policy by the public that is different from current practice to date.

“Carbon” boards and transition risk: Explicit and implicit exposure implications for total stock returns and dividends payouts

Transition risk disclosure facilitates investors' understanding of the potential company-level risks associated with a low-carbon transition. Among the others, stricter regulations could undermine companies' financial performances, affecting operations costs and revenues and their impact being proportional to the business carbon intensity. Transition risk disclosure takes two forms. One is a textual description of transition risk in compulsory and voluntary non-financial disclosure. The other is the disclosure of carbon emissions and intensity, which is implicitly associated with transition risk exposure. We empirically assess the impact of the two transition risk measures on shareholder returns to test the “carbon premium” hypothesis. We consider shareholder return as the sum of capital gain and dividend paid and analyse the impact of transition risk on both. Evidence supports the “carbon premium” hypothesis but suggests such a premium is transferred to shareholders primarily via dividend payouts. One possible explanation consistent with this evidence is that boards in highly polluting companies use dividends to compensate investors for the relatively lower capital gain, dissuading them from divesting due to low returns, stigmatisation effects and regulatory risks.