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The aim of this research is to examine the determinants of the level of corporate risk disclosure (CRD) in the interim reports of Swedish non-financial companies. A quantitative research approach is used, the sample data of which consist of 166 firms with 4,849 interim reports over a 10-year period. By utilizing the notion of risk and its definition, I have distinguished three categories of risk, namely risk as uncertainty, risk as threat and risk as opportunity. A systematic content analysis is conducted with the use of a software program, which is specifically designed for this purpose. The number of sentences that contain keywords related to the three risk categories is counted as the total CRD score, which is transformed to the disclosure index. I have examined the impact of firms’ characteristics and corporate governance mechanisms on the level of CRD based on agency theory. The ordinary least squares regression method with  control for fixed year effects is used to analyse the data, which show that firm size and audit committee have a positive relationship with the level of corporate risk disclosure. The result demonstrates also that there is a negative relationship between family ownership and the level of CRD, and an insignificant relationship between leverage and the level of CRD.

no / Manuscript Type: Empirical Research Question/Issue: This paper examines the influence of corporate governance on risk disclosure practices in the UK and Italy and also studies the impact of those practices on market liquidity. Research Findings/Insights: We find that governance factors principally influence the decisions of UK (Italian) firms over whether to exhibit risk information voluntarily (mandatorily) in their annual report narratives. When we distinguish between firms with strong and weak governance (in terms of board efficiency) in each country, we find that the factors that affect mandatory and voluntary risk disclosure appear to be driven more by strongly governed firms in both countries. Furthermore, strongly governed firms in the UK tend to provide more meaningful risk information to their investors than weakly governed firms. In Italy, however, we find that strongly rather than weakly governed firms exhibiting risk information voluntarily rather than mandatorily improves market liquidity significantly. Theoretical/Academic Implications: This paper emphasizes the importance of distinguishing between mandatory and voluntary risk disclosure when studying the impact of corporate governance. Our findings differ across strongly and weakly governed firms, in terms of both the factors that influence risk disclosure practices and the exact informativeness of those practices. Practitioner/Policy Implications: The results support the current regulatory trend in risk reporting within the UK that emphasizes the importance of directors and encourages rather than mandates risk disclosure. However, the results generally signal a need for further improvements in the Italian context. Our evidence also supports the value of the confidence in the UK governance system, compared to that in Italy, which motivates British firms to provide highly informative risk information more often than Italian firms.

Following the Basel Committee’s advocacy of value-at-risk (VaR) disclosure in external reports of financial institutions, the U.S. Securities and Exchange Commission issued Financial Reporting Release No. 48 to permit VaR disclosure as one of the most important disclosure approaches for market-risk quantitative information in 1997. This study is the first to empirically examine both economic determinants and consequences of VaR disclosure informativeness in the banking industry. First, this study finds that more informative VaR disclosure is associated with more effective corporate governance characteristics, including better shareholder protection, a larger and more independent board, the presence of a separate risk committee under the board of directors, a more independent risk committee, higher institutional ownership and a better overall governance environment. These results suggest that corporate governance mechanisms are important determinants of the informativeness of VaR disclosure. Second, the evidence shows that the cost of equity capital is negatively associated with the informativeness of VaR disclosure, consistent with informative VaR disclosure effectively communicating private information to investors about a bank’s market risk exposure and its risk management system. Additional evidence during the recent crisis further suggests the importance of VaR disclosure informativeness to the capital market as a strong signal reflecting the efficacy of risk management practices and the quality of risk governance mechanisms. However, I still find that a large proportion of the sample banks choose not to disclose information with respect to some important disclosure items (e.g., quantitative stress-test results, and non-trading portfolio VaR). It is necessary for government regulators to re-consider the current regulation on VaR disclosure in the external reports of the banking industry.

Following the Basel Committee’s advocacy of value-at-risk (VaR) disclosure in external reports of financial institutions, the U.S. Securities and Exchange Commission issued Financial Reporting Release No. 48 to permit VaR disclosure as one of the most important disclosure approaches for market-risk quantitative information in 1997. This study is the first to empirically examine both economic determinants and consequences of VaR disclosure informativeness in the banking industry. First, this study finds that more informative VaR disclosure is associated with more effective corporate governance characteristics, including better shareholder protection, a larger and more independent board, the presence of a separate risk committee under the board of directors, a more independent risk committee, higher institutional ownership and a better overall governance environment. These results suggest that corporate governance mechanisms are important determinants of the informativeness of VaR disclosure. Second, the evidence shows that the cost of equity capital is negatively associated with the informativeness of VaR disclosure, consistent with informative VaR disclosure effectively communicating private information to investors about a bank’s market risk exposure and its risk management system. Additional evidence during the recent crisis further suggests the importance of VaR disclosure informativeness to the capital market as a strong signal reflecting the efficacy of risk management practices and the quality of risk governance mechanisms. However, I still find that a large proportion of the sample banks choose not to disclose information with respect to some important disclosure items (e.g., quantitative stress-test results, and non-trading portfolio VaR). It is necessary for government regulators to re-consider the current regulation on VaR disclosure in the external reports of the banking industry.

Risk disclosure is an important issue, firstly to prevent future unexpected bankruptcies and economic scandals, secondly to create trust between a company and its stakeholders. Given the importance of the issue, previous literature has mainly focused on quantity of risk disclosures. In this dissertation, both quality and quantity of risk disclosures in the annual reports of 65 companies listed on the Nasdaq OMX Stockholm exchange are analyzed. The objectives are to describe the degree of risk disclosures and to understand whether the quality and quantity of this information can be explained by size, industry and/or performance of the company. By conducting a content analysis of the annual reports, we explored if the required risk information was disclosed (quantity) and how it was disclosed (quality). Afterwards, a statistical analysis was conducted in order to obtain a deeper understanding of the results from our content analysis. The findings of our study are that both quality and quantity of risk disclosures in our sample are only half as good as they should be according to requirements in the Swedish context. We found that there is a difference in quality and quantity of risk disclosures between two of the industry categories; Energy and Materials, where the first mentioned is the best and the second the worst. We did not find significant correlations between the quality and quantity of risk disclosure and the size or the performance for the whole sample. Still, we found some differences in both quality and quantity of risk disclosure information when looking at smaller parts of our sample. Size has a significant impact on both quality and quantity of risk disclosures within the Industrials and Information Technology companies. Among Information Technology companies, also performance has a significant impact on the quantity of risk disclosure.

Banks within Europe have a major role in the European financial system. The financial collapse in 2008 made regulators well aware of the importance of corporate transparency to allow stakeholders to assess the banks health and maintain a stable market. Risk reporting within the European Union (EU) contributes to transparency in terms of disclosing information on risk management activities. The heavy regulations and demand from investors have caused the extent of risk reports to increase over time. The purpose of this research is to investigate if there is a relationship between the quantity of information in risk disclosures and the financial performance for banks in the EU and thus contribute with new knowledge to the field of finance, and increase managers' as well as stakeholders' understanding of the impact of risk reports. The methodological standpoints guide our choices throughout the research process. Our epistemological view is positivism and our ontological view is objectivism. A deductive research approach and a quantitative research method are adopted to collect archival data from risk reports and on financial performance from a sample of 41 banks. Our population consist of banks within the EU. The research design is cross-sectional using data from one point in time, the time period 2013-04-01 - 2014-03-31. Based on relevant theories and previous research, quantity proxies in terms of number of pages, words, characters and recurrence of keywords together with financial performance measures in terms of stock return, standard deviation and beta are used to investigate the relationship. 3 hypotheses are derived and tested by running regressions where the financial performance measures are the dependent variables and our proxies for quality are the independent variables. Our tests show that no significant relationship exists between the quantity of information in risk disclosures and the financial performance of banks within the EU. The results from our research contribute with new knowledge to academics within the field of finance by increasing the understanding of the explanatory variables for financial performance. Moreover, academics may use our results to justify the choice of other proxies than quantity when investigating quality in corporate disclosures. Additionally, our results indicate that practitioners should not use quantity of information in risk reports as an indicator of quality, as no relationship with the financial performance of a bank could be statistically proven.

The Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board (PCAOB) have proposed standards that could alter the judgments of users of financial statements. This study examines how certain regulations including revenue measurement choices made by management combined with risk disclosure as proposed by the PCAOB could interact with the propensity of the user to rely on financial information to affect how a class of private company financial statement users - seed equity investors - value a private company. Through experimental methods manipulating revenue measurement choice and risk disclosure, I find that seed equity investor value judgments of early stage companies are significantly influenced by accounting disclosures. Specifically, accounting disclosures regarding level of risk and revenue measurement that accompany financial models in the valuation process significantly alter a seed equity investor's value judgment of early stage companies. This segment of financial statement users tends to place the majority of their reliance on non-financial, subjective factors as predictors of future success of early stage companies. Further, their judgments are swayed by wholly different financial disclosures than their "Wall Street" investor counterparts in that conservative and low risk information creates large revisions in value judgment. The implication of this study is to suggest that "Main Street" investors consume financial information and their related disclosures differently than "Wall Street" investors - an inference important for standards setters to understand as they craft regulations that govern private companies.

Background and problem: Accounting shall give a true and a fair view of a company, where an annual report´s compliance with IFRS 7 and risk disclosure ratio is highly valued by stakeholders. Risks are always a relevant topic, as they arise unexpectedly and society´s expectations of businesses change. The information that companies provide regarding risk, both current and potential, is highly relevant to their stakeholders. Thus, risk disclosures are arguably one of the most important elements in the analysis of annual reports. This implies that companies’ risk disclosures are actualized and problematized, where compliance with Covid-19 related risks, interest rate risk and geopolitical instability increases the complexity of risk disclosures. As a result of the preceding, there is a valid reason to examine the extent to which companies listed on Nasdaq OMX Stockholm are complying with the IFRS framework and the IFRS 7 standard regarding to risk disclosures. Purpose: The purpose of this study is to examine the extent to which companies listed on Nasdaq OMX Stockholm provide information about risks in their annual reports. The study also aims to examine which factors affect the level of risk disclosure in companies’ annual reports. Research issue: To which extent do companies listed on Nasdaq OMX Stockholm provide risk disclosures in their annual reports and what are the factors that affect this choice? Method: The study adopts a quantitative research strategy in order to achieve the objectives set by there search issue. The research material consists of each company’s annual report from 2022, which implies that these are the source of information and that a content analysis is performed to quantify the content. The study has excluded the financial sector, as they are subject to special rules. The factors that are examined in the statistic models used to explain the effects on the amount of risk disclosures are: companysize, industry, audit firm, the size of the board of directors, the date of publication of the annual report and the number of pages in the annual report. The final sample size is 64 companies. Results and conclusions: The results of the study accept the hypothesis that firm size is an explanatory factor in the extent to which companies provide risk disclosures in their annual reports in relation to IFRS7. The remaining hypotheses are rejected, as the results could not prove any significance for the sevariables in relation to the extent of risk disclosures.

yes / This paper examines the effect of textual risk disclosure on the amount of firm-specific information incorporated into share prices, as measured by stock price synchronicity, for Chinese listed firms during 2007-2011. We find that synchronicity is inversely associated with risk disclosure, suggesting that risk disclosure is firm specific and useful to investors. In addition, our results document that the usefulness of risk information is statistically and economically more pronounced among internationally oriented firms than their domestically oriented peers, consistent with the necessity for risk disclosure to be more meaningful when it relates to greater uncertainty. Finally, we find that internationally oriented firms tend to disclose more risk factors than their domestically oriented counterparts. Our findings are robust to a variety of specifications and the use of alternative measures of risk disclosure, stock price synchronicity and international orientation. Our paper has practical implications since its findings shed light on the current debate on whether or not narrative sections of annual reports convey useful information to investors.