scholarly journals The informativeness assessment of risk and risk management disclosure in corporate reporting: An empirical analysis of Italian large listed firms

2019 ◽  
Author(s):  
Francesco De Luca ◽  
Ho-Tan-Phat Phan
Keyword(s):  
Risk Management ◽  
Empirical Analysis ◽  
Listed Firms ◽  
Corporate Reporting

Informativeness Assessment of Risk and Risk-Management Disclosure in Corporate Reporting: An Empirical Analysis of Italian Large Listed Firms

2019 ◽  
pp. 9-41 ◽  
Author(s):  
Francesco De Luca ◽  
Ho-Tan-Phat Phan
Keyword(s):  
Risk Management ◽  
Specific Information ◽  
Risk Disclosure ◽  
Specific Level ◽  
Listed Firms ◽  
Corporate Reporting ◽  
Related Information ◽  
Industry Type ◽  
Disclosure Requirements ◽  
Two Phases

Purpose Risk-related information is prevalently used in the decision-making process by various counterparties. Therefore, this study investigates how compa-nies conduct their risk-disclosure practice after the new Italian Legislative Decree No. 254 of December 30, 2016. In particular, we draw attention to three aspects: (1) the interaction relationship among risk or risk management (RRM), industry, type of risk, and level of specific disclosure; (2) the variation of specific level of disclosing risk-related information across the industries and types of risk; and (3) the different behavior between risk and risk-management disclosure in the after-math of the regulation's issuance. Design/methodology/approach The study is based on a sample of large un-dertakings and groups that are subject to the Legislative Decree. Two phases of content analysis were executed to analyze the risk and risk-management disclosure. The research questions were investigated with the row effects loglinear model. Findings Our result shows that there are interaction relationships among RRM, type of risk, industry, and level of specific disclosure. Companies provide risk-related information at different levels of specificity depending on whether the information is risk description or risk management, the firms are operating in manu-facturing or nonmanufacturing, and the type of risk that the firms disclosed in their reports. Practical implications The paper provides evidence of inconsistent company behavior in disclosing company-specific information in favor of internal and ex-ternal stakeholders, particularly by balancing company-specific disclosure be-tween risk descriptions and risk-management policies. Policymakers might also consider this current phenomenon to decide to what extent disclosure requirements should be detailed and, instead, what room should be left for management discre-tion with respect to users' needs. Originality/value This paper is an up-to-date assessment of Italian firms' compliance with Legislative Decree No. 254 of December 30, 2016.

Determinants of voluntary formation of risk management committees

2014 ◽  
Vol 29 (7) ◽  
pp. 649-671 ◽  
Author(s):  
Nkoko Blessy Sekome ◽  
Tesfaye Taddesse Lemma
Keyword(s):  
South Africa ◽  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

Purpose – The aim of this paper is to examine the nexus between firm-specific attributes and a company’s decision to setup a separate risk management committee (RMC) as a sub-committee of the board within the context of an emerging economy, South Africa. Design/methodology/approach – The authors analyse data extracted from audited annual financial reports of 181 non-financial firms listed on the Johannesburg Securities Exchange (JSE) by using logistic regression technique. Findings – The results show a strong positive relationship between the existence of a separate RMC and board independence, board size, firm size and industry type. However, the authors fail to find support for the hypotheses that independent board chairman, auditor reputation, reporting risk and financial leverage have an influence on a firm’s decision to establish RMC as a separately standing committee in the board structure. The findings signify the role of costs associated with information asymmetry, agency, upkeep of a standalone RMC, damage to the reputation of directors and industry-specific idiosyncrasies on a firm’s decision to form a separate RMC. Research limitations/implications – As in most empirical studies, this study focuses on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the literature. Investigating the role of firm-specific governance attributes other than those considered in the present study (e.g. gender of directors, ownership structure, etc.) could further enhance the understanding of antecedents of risk-management practices. Practical implications – The findings have practical implications for the investment community in assessing the quality of risk management practices of companies listed on the JSE. Furthermore, the results provide insights that are potentially useful to the King Committee and other corporate governance regulators in South Africa in their effort to improve corporate governance practices. Originality/value – The present study focuses on firms drawn from an emerging economy which has profound economic, institutional, political and cultural differences compared to advanced economies, which have received a disproportionately higher share of attention in prior studies. Thus, the study contributes additional insights to the literature on corporate risk management from the perspective of an emerging economy.

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