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Determinants of narrative risk disclosures in UK interim reports

Author

Listed:
  • Hany Elzahar
  • Khaled Hussainey

Abstract

Purpose - The purpose of this paper is to contribute to the existing disclosure literature by examining the determinants of narrative risk information in the interim reports for a sample of UK non‐financial companies. Design/methodology/approach - This study uses the manual content analysis to measure the level of risk information in interim report narrative sections prepared by 72 UK companies. It also uses the ordinary least squares regression analysis to examine the impact of firm‐specific characteristics and corporate governance mechanisms on narrative risk disclosures. Findings - The empirical analysis shows that large firms are more likely to disclose more risk information in the narrative sections of interim reports. In addition, the analysis shows that industry activity type is positively associated with levels of narrative risk disclosure in interim reports. Finally, the analysis shows statistically insignificant impact of other firm‐specific characteristics (liquidity, gearing, profitability, and cross‐listing) and corporate governance mechanisms on narrative risk disclosure. Practical implications - The study's findings have practical implications. It informs investors about the characteristics of UK companies that disclose risk information in their interim reports. For example, the findings show that narrative risk disclosures are affected by firm size and industry type rather than firms' risk levels (e.g. financing risk measured by the gearing ratio or liquidity risk measured by lower liquidity ratios). Practical implications for managers from these findings are that, in order to keep investors satisfied, companies with high levels of financing and liquidity risks should look at investors' demands for risk disclosure. This will help investors when making their investment decisions. Originality/value - The determinants of narrative risk disclosure in interim reports have not been explored so clearly in prior research and, therefore, this paper is the first of its kind to examine this research issue for a sample of UK companies.

Suggested Citation

  • Hany Elzahar & Khaled Hussainey, 2012. "Determinants of narrative risk disclosures in UK interim reports," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 13(2), pages 133-147, February.
  • Handle: RePEc:eme:jrfpps:15265941211203189
    DOI: 10.1108/15265941211203189
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    Citations

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    Cited by:

    1. Nadia Smaili & Camélia Radu & Amir Khalili, 2023. "Board effectiveness and cybersecurity disclosure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1049-1071, December.
    2. Adel Necib & Jarboui Anis, 2023. "The Effect of Corporate Governance Mechanisms on Integrated Reporting (IR) Quality: The Case of FTSE100 Companies," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(2), pages 105-131.
    3. AlKhawaldeh Afaf Mohammed & Saaydah Mansour Ibrahim, 2022. "Determinants of Corporate Risk Disclosure for Non- Financial Companies Listed on Amman Stock Exchange," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 152-177.
    4. Dalia Hussein Elsayed & Tariq H. Ismail & Eman Adel Ahmed, 2024. "The impact of cybersecurity disclosure on banks’ performance: the moderating role of corporate governance in the MENA region," Future Business Journal, Springer, vol. 10(1), pages 1-15, December.
    5. Evana, Einde & Widiyanti, Ade & Fuadi, Raida & Mirfazli, Edwin & San-José, Leire, 2023. "The influence of corporate characteristics and Good Corporate Governance toward the risk management disclosure [La influencia de las características corporativas y el buen gobierno corporativo haci," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 35(1), pages 404-417, June.
    6. Düsterhöft, Maximilian & Schiemann, Frank & Walther, Thomas, 2023. "Let’s talk about risk! Stock market effects of risk disclosure for European energy utilities," Energy Economics, Elsevier, vol. 125(C).

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