Determinants of risk reporting by Portuguese and Spanish non-finance companies

Abstract

Purpose-The paper seeks to assess the risk reporting practices across two European Latin countries (Portugal and Spain). Moreover, drawn on elements of agency, legitimacy, resources-based perspectives, and institutional theory this study also intends to assess if the influence of corporate governance mechanisms on risk reporting is mediated by strategic/institutional legitimacy interests. Design/methodology/approach-From a sample of 60 non-finance Portuguese and Spanish companies with securities traded on the Euronext Lisbon stock exchange market and on the Madrid stock exchange market, respectively, at December, 2011, the Corporate Governance reports and the "risk/risk management" sections of the Management reports included on consolidated annual reports for 2011 were manually content analyzed, according to prior literature. Further, multiple linear regressions were used to assess the potential relationships between corporate governance mechanisms and risk reporting. Findings-Results indicate that visible companies, operating in a country with a weaker legal environment, and during periods of financial distress disclose more discretionary RRD, basically to contextualize their negative outcomes. Some corporate governance mechanisms were crucial to improve risk information. Originality-The paper goes beyond prior literature work and assesses if the theoretical framework grounded on agency, legitimacy, resources-based perspective, and institutional theory is suitable in explaining RRD in an under-researched setting (European Latin countries, such as Portugal and Spain with low agency costs and different corporate governance models). Moreover, the analysis embraces a wider and homogeneous range of internal and external corporate governance mechanisms and uses a period in which both countries were severely affected by a sovereign debt crisis with negative impacts on company's liquidity and financial risks. A research setting like this has not been studied hitherto.

Board governance quality and risk disclosure compliance among financial institutions in Uganda

“…A case in point is CBL, one of the collapsed banks, which was found to have board members without tertiary certificate, had no approved board charter and some board meetings appeared not to have taken place. Furthermore, the findings are consistent with previous studies (Agyei-Mensah and Buertey, 2019;Oliveira et al, 2018;Agyei-Mensah, 2017a;Mokhtar and Mellett, 2013) which found that some governance mechanisms significantly affect the level of RDC. The current findings confirm the significant role of BGQ in enhancing RDC of Ugandan FIs.…”

“…Agyei-Mensah (2017a, b), Sellami and Fendri (2017), Juhmani (2017), Oliveira et al (2018) and Mnif and Znazen (2020), while it is inconsistent with studies of Rahman and Hamdan (2017) and Alfraih and Almutawa (2017). The findings confirm the significant role of board independence in boosting RDC in Ugandan FIs.…”

“…The impact of BGQ on RDC has been investigated and prior research indicates that BGQ is related to RDC (Agyei-Mensah and Buertey, 2019;Oliveira et al, 2018;Agyei-Mensah, 2017a;Tauringana et al, 2016;Krismiaji et al, 2016;Mokhtar and Mellett, 2013). The concept of BGQ is built from a behavioral perspective rather than a structural perspective (Nalukenge et al, 2017;Nkundabanyanga et al, 2013).…”

“…However, empirical evidence about the relationship between BGQ and RDC is rather fragmented. Some studies found the positive impact of BGQ on RDC (Agyei-Mensah and Buertey, 2019;Oliveira et al, 2018;Agyei-Mensah, 2017a;Tauringana and Chithambo (2016); Mokhtar and Mellett, 2013). For instance, Agyei-Mensah and Buertey (2019) establish that governance quality mechanisms have a positive influence on corporate risk disclosure.…”

Risk committee, corporate risk-taking and firm value

“…We measure INDAVGRC, which represents the average (mean) presence of stand-alone risk committee aligned with the peers in the same industry (two-digit SIC) during each year of the sample period (excluding the firm itself). We expect a positive association between RC and a set of corporate governance variables (BODSIZE, BODIND, BIG4), as firms with a large board size (BODSIZE), a higher number of independent directors (BODIND), and large auditors (BIG4) are more likely to set up a stand-alone risk committee (Subramaniam et al, 2009;Yatim, 2010).An audit committee is often considered as an effective monitoring mechanism to mitigate agency conflict (Oliveira et al, 2018). Therefore, we include several audit committee attributes (ACSIZE, ACINDEP, ACEXPERT) as determinants of the existing risk committee.…”