Does competitive position of a firm affect the quality of risk disclosure?

Shivaani, M. V.; Agarwal, Nishant

doi:10.1016/j.pacfin.2020.101317

Cited by 20 publications

(11 citation statements)

References 83 publications

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“…In response to this apparent contradiction, it has recently been observed that a firm's competitive position, rather than product market competition itself, will have a decisive impact on its ORD quality. In other words, firms that fare well in the product market signal their strength through enhanced risk disclosure and greater transparency (Shivaani and Agarwal 2020).…”

Section: Market Competition and Ord Qualitymentioning

confidence: 99%

Risk governance, market competition and operational risk disclosure quality: a study of the ASEAN-5 banking sector

Karyani¹,

Kolade²,

Dewo³

2021

JOP

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This paper investigates the impact of risk governance and market competition on banks' operational risk disclosure (ORD) quality (total and voluntary) in the Association of Southeast Asian Nations (ASEAN-5) banking sector. Using 285 firmyear observations encompassing the period 2010-14 for risk governance indexes, we investigate the moderating effects of market competition, relative to total risk governance practices, on banks' ORD quality. The results of our panel data analysis show that there is a substitution effect of competition, which could reduce the adverse consequences of weak risk governance practices. However, governance factors -such as the chief risk officer's (CRO's) role and independence, and the risk communication system -decrease voluntary ORD quality. These findings have implications for the role of the financial regulator in using market competition as an effective mechanism to replace banks' weak risk governance, thus encouraging banks to improve their

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Section: Market Competition and Ord Qualitymentioning

confidence: 99%

Risk governance, market competition and operational risk disclosure quality: a study of the ASEAN-5 banking sector

Karyani¹,

Kolade²,

Dewo³

2021

JOP

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“…The present study contributes as follows: first, the study aims to analyze the impact of divulgence of risk information in the annual reports on corporate reputation in the Indian context over ten year period from 2009-2010 to 2018-2019, which is an untapped area. Second, in India, despite mandatory adoption of accounting standards on financial risk such as Ind-AS 107: Financial instrument disclosure and allied regulations such as Clause 49, listing agreement to stock exchanges has made it mandatory for corporations to disclose prime risks under the head "Risk and Concerns," but the content to be disclosed is at the discretion of managers, which makes it more critical to analyze risk disclosure in the Indian context (Shivaani and Agarwal, 2020). Third, corporate reputation is build over the years through several contributions of business, and one such practice is transparent disclosure through risk disclosure, so analyzing this relationship will bring in futuristic insights.…”

Section: Introductionmentioning

confidence: 99%

Nexus between risk disclosure and corporate reputation: a longitudinal approach

Arora

Saggar

Singh

2021

JSMA

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PurposeThe study aims to explore the unexplored domain by examining the impact of risk disclosure on corporate reputation in an emerging economy, like India, characterized by huge information asymmetry and uncertainty.Design/methodology/approachIn total two measures of corporate reputation, i.e. market capitalization and excess of market value over book value have been deployed to measure reputation. Automated content analysis has been executed to measure the extent of total risk disclosure. The empirical analysis is premised on a sample of S&P BSE-100 index spanning over the period of ten years from 2009–2010 to 2018–2019; which eventually gets reduced to 58 nonfinancial firms. In order to unearth the risk–reputation relationship, a panel regression technique has been employed.FindingsThe main findings unmask that corporate risk disclosure has a positive bearing on corporate reputation. Substantiating legitimacy theory, its alternative measures like market capitalization and excess of market value over book value divulged to positively influence corporate reputation.Research limitations/implicationsThe study has certain limitations: since there is no standard method of measuring reputation, the results may vary subject to the changes in proxies of corporate reputation. The study also analyzed S&P BSE 100 index in India, and future research needs to approach a larger sample and in other emerging economies to fill up enough empirical evidence in this domain.Practical implicationsThe findings provide insight into the managers on making higher divulgence of material risk information for augmenting corporate reputation. In other words, it indirectly propels the firm to exhibit higher risk information for building reputational capital. From the investor's standpoint, they should admire such firms which dispel more risk information and should have positive outlook toward them, which in turn prompts them to disclose more risks.Originality/valueThis study is unique as it is the first longitudinal study examining the impact of risk disclosure on corporate reputation in Indian settings. It, thus, assists in furthering the risk disclosure literature where there is hardly any study that comprehensively looks into risk–reputation liaison among Indian nonfinancial companies.

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“…At the same time, it is subjective and time-consuming. Fifthly, many researchers use computer softwares to extract risk keywords (Ibrahim & Hussainey, 2019 ), mood and nature (Shivaani & Agarwal, 2020 ), semantic tone (Gonzalez et al, 2019), and other features to measure the intensity of risk information disclosure. In practice, a sentence may contain a lot of subjective information or intentions (Mai & Le, 2020 ) and different risk characteristics and require different risk management strategies (DuHadway et al, 2017 ).…”

Section: Methodsmentioning

confidence: 99%

Cross-influence of information and risk effects on the IPO market: exploring risk disclosure with a machine learning approach

et al. 2022

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The paper examines whether the structure of the risk factor disclosure in an IPO prospectus helps explain the cross-section of first-day returns in a sample of Chinese initial public offerings. This paper analyzes the semantics and content of risk disclosure based on an unsupervised machine learning algorithm. From both long-term and short-term perspectives, this paper explores how the information effect and risk effect of risk disclosure play their respective roles. The results show that risk disclosure has a stronger risk effect at the semantic novelty level and a more substantial information effect at the risk content level. A novel aspect of the paper lies in the use of text analysis (semantic novelty and content richness) to characterize the structure of the risk factor disclosure. The study shows that initial IPO returns negatively correlate with semantic novelty and content richness. We show the interaction between risk effect and information effect on risk disclosure under the nature of the same stock plate. When enterprise information transparency is low, the impact of semantic novelty and content richness on the IPO market is respectively enhanced.

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Does competitive position of a firm affect the quality of risk disclosure?

Cited by 20 publications

References 83 publications

Risk governance, market competition and operational risk disclosure quality: a study of the ASEAN-5 banking sector

Risk governance, market competition and operational risk disclosure quality: a study of the ASEAN-5 banking sector

Nexus between risk disclosure and corporate reputation: a longitudinal approach

Cross-influence of information and risk effects on the IPO market: exploring risk disclosure with a machine learning approach

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