Risk disclosure, cost of capital and bank performance

Nahar, Shamsun; Azim, Mohammad I.; Jubb, Christine

doi:10.1108/ijaim-02-2016-0016

Cited by 72 publications

(71 citation statements)

References 46 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Thus, to calculate this cost, the formula of Easton, (2004), which is widely adopted by previous studies (Li, 2010;Urquiza et al, 2012;Kim et al, 2013;and Nahar et al, 2016), was used. These authors state that the measure proposed by (Easton, 2004) is a robust assessment of specific cost of capital.…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

View full text Add to dashboard Cite

The purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. AbstractThe purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. JEL Classification: M40, G34

show abstract

Section: Model and Variables Of Researchmentioning

confidence: 99%

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

View full text Add to dashboard Cite

show abstract

“…Poshakwale and Courtis () find that disclosure about risk management is the part of banks’ annual reports which lowers the cost of equity capital the most, thus further emphasizing the relevance of risk disclosures. Similarly, Nahar, Azim, and Jubb () observe a significantly negative relationship between the risk disclosure level in the annual reports of banks listed on the Dhaka Stock Exchange and the cost of equity capital. Moreover, Jizi and Dixon () show that risk management disclosures in the annual reports of US commercial banks are associated with higher stock prices and reduced volatility.…”

Section: Literature Reviewmentioning

confidence: 87%

An Empirical Analysis of Market Reactions to the First Solvency and Financial Condition Reports in the European Insurance Industry

Gatzert¹,

Heidinger²

2019

J of Risk & Insurance

View full text Add to dashboard Cite

In 2017, insurers in the European Union disclosed their Solvency and Financial Condition Reports (SFCRs) according to the third pillar of Solvency II for the first time. The aim of this article is to empirically analyze market reactions to the first SFCRs for all publicly listed insurers in the European Union that published an English report based on an event study. We thereby investigate which key figures and textual attributes matter most to investors, using regression analyses and text mining approaches. We also discuss potential areas for improvement concerning SFCR disclosure, such as a central public disclosure platform and further standardization of disclosure requirements, which could further enhance the goals of transparency and market discipline in relation to Solvency II's Pillar 3. Our results show that SFCR key figures matter more than textual features. Specifically, we find a significantly positive market impact of the solvency ratio calculated without transitionals or adjustments and a significantly negative one for the solvency capital requirement (SCR).

show abstract

Section: Introductionunclassified

“…A evidenciação dos fatores de risco, inclusive o risco de mercado, demonstra uma maior transparência da companhia junto a analistas de mercado e investidores, contribuindo para sua maior credibilidade e também para redução do seu custo de capital (Beuren et al, 2011;Dutta e Nezlobin, 2017;Nahar et al, 2016). Dessa forma, o presente estudo se justifica na medida em que amplia a discussão sobre a relação do nível de disclosure com o custo de capital, na perspectiva dos fatores de risco de mercado.…”

Section: Introductionunclassified

“…O risco de mercado pode ser definido a partir do potencial de mudanças nas taxas de mercado e nos preços, incluindo taxas de juros, taxas de câmbio e preços das commodities (BIS, 1998;Fernandes et al, 2010). A clareza das informações divulgadas nos relatórios e demais documentos corporativos vem proporcionar melhores condições de julgamento e decisão a analistas de mercado e investidores, pois mostra que a instituição preocupa-se em mitigar seus riscos e evidenciá-los para o mercado, o que proporciona mais credibilidade a sua imagem institucional (Andrade et al, 2009;Moumen et al, 2016;Tan et al, 2017), reduzindo o custo de capital (Dantas et al, 2008; Dutta e Nezlobin, 2017; Linsley e Shrives, 2006;Nahar et al, 2016).O custo de capital pode ser entendido como a remuneração destinada aos credores e acionistas por disponibilizarem recursos financeiros para a empresa, considerando-se a premissa risco versus retorno (García-Sánchez e Noguera-Gámez, 2017). Neste estudo, leva-se em conta o custo de capital de terceiros, medido pela variável Kd (Bastos et al, 2009;Nardi et al, 2009), e o custo de capital próprio, representado pelo Beta estimado, conforme a abordagem do Capital Asset Pricing Model (CAPM), segundo a qual, é aquele atributo que distingue o custo de um ativo dos demais (Alencar, 2005).…”

unclassified

See 1 more Smart Citation

Disclosure of market risks and cost of capital of companies

Passos

Almendra

Luca

et al. 2017

BASE

View full text Add to dashboard Cite

Este é um artigo de acesso aberto, licenciado por Creative Commons Atribuição 4.0 Internacional (CC BY 4.0), sendo permitidas reprodução, adaptação e distribuição desde que o autor e a fonte originais sejam creditados. RESUMOSob os preceitos da Teoria da Divulgação, o estudo tem o objetivo de analisar a relação entre o nível de evidenciação dos fatores de risco de mercado e o custo de capital das empresas participantes do Novo Mercado e dos Níveis 1 e 2 de governança corporativa da BM&FBovespa. A investigação difere da maioria dos estudos, pois analisa tanto o custo de capital próprio como o de terceiros, destacando-se ainda, a relevância da evidenciação dos fatores de risco para a eficiência do mercado de capitais. Foram avaliados dados de 2014 de 151 empresas, utilizando--se Análise de Correspondência e Regressão Linear Múltipla. O nível de disclosure dos fatores de risco de mercado foi identificado a partir dos Formulários de Referência das empresas, e os dados do custo de capital foram extraídos da Economática®. Verificou-se que o nível de disclosure dos riscos de mercado das empresas assinala relação positiva com o custo de capital de terceiros, representado por Kd. Não foi encontrada relação entre o nível de disclosure e o custo de capital próprio, mensurado pelo Beta. Os resultados sugerem a pouca maturidade do mercado de capitais brasileiro ao lidar com os direcionadores da Teoria da Divulgação, em que a evidenciação, não obstante efeitos considerados negativos, proporciona maior credibilidade.Palavras-chave: disclosure, risco de mercado, custo de capital. ABSTRACTUnder the principles of Disclosure Theory, the study aims at analyzing the association between the disclosure level of market risk factors and the cost of capital of companies listed on "Novo Mercado" and segments 1 and 2 of corporate governance of BM&FBovespa. The research differs from most studies because it analyzes both the cost of equity capital as cost of capital debt. It also stands out the relevance of disclosure of risk factors for capital market efficiency. We evaluated the data of 151 companies for the financial year 2014, using the correspondence analysis and the multiple linear regression. The disclosure level of market risk factors of the sample companies was identified from their respective reference forms, and the data of the cost of capital were extracted from Economática® base. It was verified that the disclosure level of market risks of the companies indicates a positive relation with the cost of capital debt, represented by Kd. No relation was found between the level of disclosure and the cost of equity capital, measured by DISCLOSURE DOS RISCOS DE MERCADO E O CUSTO DE CAPITAL DE EMPRESAS 1 DISCLOSURE OF MARKET RISKS AND COST OF CAPITAL OF COMPANIES DISCLOSURE DOS RISCOS DE MERCADO E O CUSTO DE CAPITAL DE EMPRESAS INTRODUÇÃOEm mercados financeiros eficientes, nos quais as informações evidenciadas refletem-se integralmente nos preços (Fama, 1976), considera-se que toda informação importante deve ser disponibilizada para seus...

show abstract

Risk disclosure, cost of capital and bank performance

Cited by 72 publications

References 46 publications

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

An Empirical Analysis of Market Reactions to the First Solvency and Financial Condition Reports in the European Insurance Industry

Disclosure of market risks and cost of capital of companies

Contact Info

Product

Resources

About