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Voluntary risk reporting to enhance institutional and organizational legitimacy

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Listed:
  • Jonas Oliveira
  • Lúcia Lima Rodrigues
  • Russell Craig

Abstract

Purpose - This paper aims to explore the factors that affected the voluntary risk‐related disclosures (RRD) in the individual annual reports for 2006 of Portuguese banks. It also explores the extent to which those reports conformed to Basel II requirements in terms of the voluntary disclosure of operational risk and capital structure and adequacy matters. Design/methodology/approach - The authors conduct a content analysis of the annual reports of a sample of 111 banks. Voluntary operational risk and capital structure and adequacy disclosures were assessed using a list of disclosure categories that were developed from the Third Pillar disclosure requirements of the Basel II Accord. Findings - Stakeholder monitoring and corporation reputation are crucial factors that explain the risk reporting practices observed. Voluntary risk reporting appears to enhance legitimacy for two major reasons: first, by fulfilling institutional pressures to assure the effectiveness of market discipline; and second, by managing stakeholder perception of a corporation's reputation. Originality/value - The voluntary RRD observed are shown to be explained by legitimacy theory and resources‐based perspectives. This theoretical framework has not been tested hitherto in explaining the motives for banks to make voluntary RRD.

Suggested Citation

  • Jonas Oliveira & Lúcia Lima Rodrigues & Russell Craig, 2011. "Voluntary risk reporting to enhance institutional and organizational legitimacy," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(3), pages 271-289, July.
    • Handle: RePEc:eme:jfrcpp:v:19:y:2011:i:3:p:271-289
    DOI: 10.1108/13581981111147892
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    References listed on IDEAS

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    13. Beata Zyznarska-Dworczak & Kristina Rudžionienė, 2022. "Corporate COVID-19-Related Risk Disclosure in the Electricity Sector: Evidence of Public Companies from Central and Eastern Europe," Energies, MDPI, vol. 15(16), pages 1-21, August.
    14. Rodríguez Domínguez, Luis & Noguera Gámez, Ligia Carolina, 2014. "Corporate reporting on risks: Evidence from Spanish companies," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 17(2), pages 116-129.
    15. Irina Andrievskaya & Mikhail Raschupkin, 2015. "Is it Worth Being Transparent? Evidence from the Russian Banking System," HSE Working papers WP BRP 51/FE/2015, National Research University Higher School of Economics.
    16. Magnus Willesson, 2014. "New Experiences from Voluntary Risk Disclosures. Operational Risk in Nordic Banks," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 105-126, July.
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    18. Abdallah, Abed Al-Nasser & Hassan, Mostafa Kamal & McClelland, Patrick L., 2015. "Islamic financial institutions, corporate governance, and corporate risk disclosure in Gulf Cooperation Council countries," Journal of Multinational Financial Management, Elsevier, vol. 31(C), pages 63-82.

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