Value relevance of value-at-risk disclosure

Lim, Chee Yeow; Tan, Patricia M. S.

doi:10.1007/s11156-007-0038-7

Cited by 32 publications

(18 citation statements)

References 27 publications

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“…This archival research predominantly focuses on quantitative disclosures in the financial statements of banks and reports somewhat mixed results. For example, early findings that disclosures of VaR modelling are associated with measures of company value or measures of risk (Jorion 2002, Lim and Tan 2007, Liu et al 2004) were contradicted in more recent work (Pérignon and Smith 2010). Similarly, research into companies' use of fair values calculated under each of the three levels of fair value suggested some relation between the degree of reliability of the fair value calculation and share price or risk measure, but evidence was also inconsistent (Liao et al 2010, Riedl and Serafeim 2011, Song et al 2010).…”

Section: Ifrs 7 Usefulness Literaturementioning

confidence: 99%

Derivatives disclosure in corporate annual reports: bank analysts' perceptions of usefulness

Bean

Irvine

2015

Accounting and Business Research

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Responding to mixed evidence on the decision-usefulness of annual report disclosures for derivative financial instruments to capital market participants, and concerns identified by practice, this paper examines usefulness in a direct study of user perceptions. Interviews with analysts from Australia's four major banks reveal essential usefulness, limited by the disclosures' failure to reflect companies' actual use of derivatives throughout the period, and inability of users to understand companies' offbalance sheet risk and risk management practices from information considered generic and boilerplate. The research complements and extends existing archival and survey research and provides new evidence suggesting low cost ways for increasing usefulness. It supports the IASB's disclosure recommendations in its recent Discussion Paper: A Review of the Conceptual Framework for Financial Reporting but, at the same time, highlights that for these proposed measures to be successful in relation to IFRS 7, they may need to address other issues. The research increases knowledge of the informational requirements of lenders, an important class of financial information user, and supports calls from practice for companies to improve their disclosure of material economic risks.

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Section: Ifrs 7 Usefulness Literaturementioning

confidence: 99%

Derivatives disclosure in corporate annual reports: bank analysts' perceptions of usefulness

Bean

Irvine

2015

Accounting and Business Research

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“…Linsmeier et al (2002) find that MRDs reduce investors' uncertainty and diversity of opinion arising from changes in interest rates, foreign exchange rates, and commodity prices. Jorion (2002) and Lim and Tan (2007) document that value-at-risk (VaR) disclosures are informative as these can predict the variability of trading revenues.…”

Section: Market Risk Disclosures (Mrds)mentioning

confidence: 99%

Risk Committee, Firm Life Cycle, and Market Risk Disclosures

Al‐Hadi¹,

Hasan²,

Habib³

2015

Corporate Governance

148

217

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Manuscript Type: EmpiricalResearch Question/Issue: This study investigates whether the existence of a separate risk committee and risk committee characteristics are associated with market risk disclosures. It also tests whether the role of a risk committee in affecting market risk disclosures varies for different firm life cycle stages. Research Findings/Insights: Using 677 firm-year observations of financial firms from Gulf Cooperation Council (GCC) countries during the years 2007-2011, we find that firms with a separate risk committee are associated with greater market risk disclosures, an effect that is more pronounced for mature-stage firms. Furthermore, findings suggest that risk committee qualifications and size have a significant positive impact on market risk disclosures. Theoretical/Academic Implications: This study complements the corporate governance literature by incorporating agency theory, legitimacy theory, stakeholder theory, and the resource-based theory to provide more robust evidence of the impact of a separate risk committee and the firm life cycle on market risk disclosures. Our results support the monitoring effect of a separate risk committee and suggest that a separate risk committee can improve "firm-level corporate governance" in the GCC countries characterized by a poor informational environment. Practitioner/Policy Implications: Findings from this study provide evidence that the existence, qualifications, and size of risk committees may be used as a channel to improve the disclosure level, suggesting a policy prescription for regulators and policymakers. Investors may also find these results useful in forming their own expectations about firm-level risk disclosures.

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“…Linsmeier et al (2002) find that MRDs reduce investor uncertainty and diversity of opinion arising from changes in interest rates, foreign exchange rates, and commodity prices. Jorion (2002) and Lim and Tan (2007) show that value-at-risk (VaR) disclosures are informative, as they can predict the variability of trading revenues. Other studies by Diamond and Verrecchia (1991), Kim and Verrecchia (1994), and Verrecchia (2001) show that increased disclosure mitigates information asymmetry between traders and thereby increases the amount of liquidity in a firm's stock by lowering transaction costs.…”

Section: Financial Risk Disclosures and Information Asymmetrymentioning

confidence: 99%

Market Risk Disclosures and Investment Efficiency: International Evidence from the Gulf Cooperation Council Financial Firms

Al‐Hadi

Hasan

Taylor

et al. 2016

Financ Manag Account

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This study examines the association between market risk disclosures (MRDs) and the investment efficiency of financial firms from six emerging markets in the Gulf Cooperation Council (GCC) region. Based on a sample of 553 firm‐year observations over the 2007–2011 period, we find that MRDs are significantly and negatively associated with both under‐investment and over‐investment and that this association is more pronounced for larger firms. We also find that the association between MRDs and under‐investment is moderated during periods of economic distress such as the Global Financial Crisis of 2008 and that the association between MRDs and over‐investment is magnified during periods of reduced financial distress. Our results are consistent with the idea that MRDs reduce information asymmetry, which ultimately improves investment efficiency. We contribute to the literature in an emerging market context by providing empirical evidence on the association between MRDs and investment efficiency across six emerging GCC capital markets. This study also fills a gap in the literature by providing evidence on the factors affecting the investment efficiency of financial firms.

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Value relevance of value-at-risk disclosure

Abstract: Market risk, Value-at-risk, Value relevance, Earnings-returns relation, Stock return volatility, G18, M41,

Cited by 32 publications

References 27 publications

Derivatives disclosure in corporate annual reports: bank analysts' perceptions of usefulness

Derivatives disclosure in corporate annual reports: bank analysts' perceptions of usefulness

Risk Committee, Firm Life Cycle, and Market Risk Disclosures

Market Risk Disclosures and Investment Efficiency: International Evidence from the Gulf Cooperation Council Financial Firms

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