IDEAS home Printed from https://ideas.repec.org/a/fan/frfrfr/vhtml10.3280-fr2019-002002.html
   My bibliography  Save this article

Informativeness Assessment of Risk and Risk-Management Disclosure in Corporate Reporting: An Empirical Analysis of Italian Large Listed Firms

Author

Listed:
  • Francesco De Luca
  • Ho-Tan-Phat Phan

Abstract

Purpose Risk-related information is prevalently used in the decision-making process by various counterparties. Therefore, this study investigates how compa-nies conduct their risk-disclosure practice after the new Italian Legislative Decree No. 254 of December 30, 2016. In particular, we draw attention to three aspects: (1) the interaction relationship among risk or risk management (RRM), industry, type of risk, and level of specific disclosure; (2) the variation of specific level of disclosing risk-related information across the industries and types of risk; and (3) the different behavior between risk and risk-management disclosure in the after-math of the regulation?s issuance. Design/methodology/approach The study is based on a sample of large un-dertakings and groups that are subject to the Legislative Decree. Two phases of content analysis were executed to analyze the risk and risk-management disclosure. The research questions were investigated with the row effects loglinear model. Findings Our result shows that there are interaction relationships among RRM, type of risk, industry, and level of specific disclosure. Companies provide risk-related information at different levels of specificity depending on whether the information is risk description or risk management, the firms are operating in manu-facturing or nonmanufacturing, and the type of risk that the firms disclosed in their reports. Practical implications The paper provides evidence of inconsistent company behavior in disclosing company-specific information in favor of internal and ex-ternal stakeholders, particularly by balancing company-specific disclosure be-tween risk descriptions and risk-management policies. Policymakers might also consider this current phenomenon to decide to what extent disclosure requirements should be detailed and, instead, what room should be left for management discre-tion with respect to users? needs. Originality/value This paper is an up-to-date assessment of Italian firms? compliance with Legislative Decree No. 254 of December 30, 2016.

Suggested Citation

  • Francesco De Luca & Ho-Tan-Phat Phan, 2019. "Informativeness Assessment of Risk and Risk-Management Disclosure in Corporate Reporting: An Empirical Analysis of Italian Large Listed Firms," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2019(2), pages 9-41.
    • Handle: RePEc:fan:frfrfr:v:html10.3280/fr2019-002002
    as

    Download full text from publisher

    File URL: http://www.francoangeli.it/riviste/Scheda_Rivista.aspx?IDArticolo=65136&Tipo=ArticoloPDF
    Download Restriction: Single articles can be downloaded buying download credits, for info: https://www.francoangeli.it/DownloadCredit
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:dau:papers:123456789/1383 is not listed on IDEAS
    2. Edward H. Bowman, 1984. "Content Analysis of Annual Reports for Corporate Strategy and Risk," Interfaces, INFORMS, vol. 14(1), pages 61-71, February.
    3. Linsley, Philip M. & Shrives, Philip J., 2006. "Risk reporting: A study of risk disclosures in the annual reports of UK companies," The British Accounting Review, Elsevier, vol. 38(4), pages 387-404.
    4. Michela Cordazzo & Marco Papa & Paola Rossi, 2017. "The interaction between mandatory and voluntary risk disclosure: a comparative study," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 32(7), pages 682-714, August.
    5. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
    6. Alessandro Lai & Gaia Melloni & Riccardo Stacchezzini, 2018. "Integrated reporting and narrative accountability: the role of preparers," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 31(5), pages 1381-1405, May.
    7. Francesca Manes-Rossi & Giuseppe Nicolo & Rebecca Levy Orelli, 2017. "Reshaping Risk Disclosure through Integrated Reporting: Evidence from Italian Early Adopters," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(10), pages 1-11, September.
    8. Abraham, Santhosh & Shrives, Philip J., 2014. "Improving the relevance of risk factor disclosure in corporate annual reports," The British Accounting Review, Elsevier, vol. 46(1), pages 91-107.
    9. Laura Girella & Mario Abela & Elisa Rita Ferrari, 2018. "Conceptual shifts in accounting: Transplanting the notion of boundary from financial to non-financial reporting," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2018(1), pages 133-175.
    10. Abraham, Santhosh & Cox, Paul, 2007. "Analysing the determinants of narrative risk information in UK FTSE 100 annual reports," The British Accounting Review, Elsevier, vol. 39(3), pages 227-248.
    11. Wagenhofer, Alfred, 1990. "Voluntary disclosure with a strategic opponent," Journal of Accounting and Economics, Elsevier, vol. 12(4), pages 341-363, March.
    12. Beretta, Sergio & Bozzolan, Saverio, 2004. "A framework for the analysis of firm risk communication," The International Journal of Accounting, Elsevier, vol. 39(3), pages 265-288.
    13. Andrew Marshall & Pauline Weetman, 2007. "Modelling Transparency in Disclosure: The Case of Foreign Exchange Risk Management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 705-739, June.
    14. Miihkinen, Antti, 2012. "What Drives Quality of Firm Risk Disclosure?," The International Journal of Accounting, Elsevier, vol. 47(4), pages 437-468.
    15. Dobler, Michael, 2008. "Incentives for risk reporting -- A discretionary disclosure and cheap talk approach," The International Journal of Accounting, Elsevier, vol. 43(2), pages 184-206.
    16. Laura Bini & Marco Bellucci & Francesco Giunta, 2016. "Put Your Money where Your Mouth is: The Difference between Real Commitment to Sustainability and Mere Rhetoric," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2016(2), pages 5-31.
    17. Mohammed Mahmud Kakanda, & Basariah Salim, & Sitraselvi Chandren, 2017. "Corporate governance reform and risk management disclosures: evidence from Nigeria," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(3), pages 357-367, July.
    18. Beretta, Sergio & Bozzolan, Saverio, 2004. "Reply to: Discussions of "A framework for the analysis of firm risk communication"," The International Journal of Accounting, Elsevier, vol. 39(3), pages 303-305.
    19. Ole-Kristian Hope & Danqi Hu & Hai Lu, 2016. "The benefits of specific risk-factor disclosures," Review of Accounting Studies, Springer, vol. 21(4), pages 1005-1045, December.
    20. Kakanda, Mohammed Mahmud & Salim, Basariah & Chandren, Siraselvi, 2017. "Corporate governance reform and risk management disclosures: Evidence from Nigeria," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(3).
    21. Hany Elzahar & Khaled Hussainey, 2012. "Determinants of narrative risk disclosures in UK interim reports," Journal of Risk Finance, Emerald Group Publishing, vol. 13(2), pages 133-147, February.
    22. Andrew Marshall & Pauline Weetman, 2007. "Modelling Transparency in Disclosure: The Case of Foreign Exchange Risk Management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5-6), pages 705-739.
    23. Marco Maffei & Massimo Aria & Clelia Fiondella & Rosanna Spanò & Claudia Zagaria, 2014. "(Un)useful risk disclosure: explanations from the Italian banks," Managerial Auditing Journal, Emerald Group Publishing, vol. 29(7), pages 621-648, July.
    24. Ragnar Lofstedt & Frederic Bouder & Jamie Wardman & Sweta Chakraborty, 2011. "The changing nature of communication and regulation of risk in Europe," Journal of Risk Research, Taylor & Francis Journals, vol. 14(4), pages 409-429, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ho-Tan-Phat Phan & Francesco De Luca & Lea Iaia, 2020. "The “Walk” towards the UN Sustainable Development Goals: Does Mandated “Talk” through NonFinancial Disclosure Affect Companies’ Financial Performance?," Sustainability, MDPI, vol. 12(6), pages 1-20, March.
    2. Anca Băndoi & Claudiu George Bocean & Mara Del Baldo & Lucian Mandache & Leonardo Geo Mănescu & Cătălina Soriana Sitnikov, 2021. "Including Sustainable Reporting Practices in Corporate Management Reports: Assessing the Impact of Transparency on Economic Performance," Sustainability, MDPI, vol. 13(2), pages 1-20, January.
    3. Vitolla, Filippo & Raimo, Nicola & Campobasso, Francesco & Giakoumelou, Anastasia, 2023. "Risk disclosure in sustainability reports: Empirical evidence from the energy sector," Utilities Policy, Elsevier, vol. 82(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ibrahim, Awad Elsayed Awad & Hussainey, Khaled & Nawaz, Tasawar & Ntim, Collins & Elamer, Ahmed, 2022. "A systematic literature review on risk disclosure research: State-of-the-art and future research agenda," International Review of Financial Analysis, Elsevier, vol. 82(C).
    2. Ott, Christian, 2020. "The risks of mergers and acquisitions—Analyzing the incentives for risk reporting in Item 1A of 10-K filings," Journal of Business Research, Elsevier, vol. 106(C), pages 158-181.
    3. Moumen, Néjia & Ben Othman, Hakim & Hussainey, Khaled, 2015. "The value relevance of risk disclosure in annual reports: Evidence from MENA emerging markets," Research in International Business and Finance, Elsevier, vol. 34(C), pages 177-204.
    4. Elshandidy, Tamer & Shrives, Philip J., 2016. "Environmental Incentives for and Usefulness of Textual Risk Reporting: Evidence from Germany," The International Journal of Accounting, Elsevier, vol. 51(4), pages 464-486.
    5. Abdelrehim, Neveen & Linsley, Philip & Verma, Shraddha, 2017. "Understanding risk disclosures as a function of social organisation: A neo-Durkheimian institutional theory-based study of Burmah Oil Company 1971–1976," The British Accounting Review, Elsevier, vol. 49(1), pages 103-116.
    6. Miihkinen, Antti, 2013. "The usefulness of firm risk disclosures under different firm riskiness, investor-interest, and market conditions: New evidence from Finland," Advances in accounting, Elsevier, vol. 29(2), pages 312-331.
    7. Francesco De Luca & Andrea Cardoni & Ho-Tan-Phat Phan & Evgeniia Kiseleva, 2020. "Does Structural Capital Affect SDGs Risk-Related Disclosure Quality? An Empirical Investigation of Italian Large Listed Companies," Sustainability, MDPI, vol. 12(5), pages 1-20, February.
    8. Lorenzo Neri & Antonella Russo, 2013. "Risk Disclosures in the Annual Reports of Italian Listed Companies," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2013(3-4), pages 141-168.
    9. Nadezda Gulko & Catriona Hyde & Nina Seppala, 2017. "Disclosure of corporate risks and governance before, during and after the global financial crisis: case study in the UK construction industry in 2006–2009," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 14(3), pages 207-223, August.
    10. Miihkinen, Antti, 2012. "What Drives Quality of Firm Risk Disclosure?," The International Journal of Accounting, Elsevier, vol. 47(4), pages 437-468.
    11. Shivaani, M.V. & Agarwal, Nishant, 2020. "Does competitive position of a firm affect the quality of risk disclosure?," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    12. Rossella Leopizzi & Antonio Iazzi & Andrea Venturelli & Salvatore Principale, 2020. "Nonfinancial risk disclosure: The “state of the art” of Italian companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(1), pages 358-368, January.
    13. Elshandidy, Tamer & Fraser, Ian & Hussainey, Khaled, 2015. "What drives mandatory and voluntary risk reporting variations across Germany, UK and US?," The British Accounting Review, Elsevier, vol. 47(4), pages 376-394.
    14. Hassanein, Ahmed, 2022. "Risk reporting and stock return in the UK: Does market competition Matter?," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    15. Abraham, Santhosh & Shrives, Philip J., 2014. "Improving the relevance of risk factor disclosure in corporate annual reports," The British Accounting Review, Elsevier, vol. 46(1), pages 91-107.
    16. Khandelwal, Chandni & Kumar, Satish & Madhavan, Vinodh & Pandey, Nitesh, 2020. "Do board characteristics impact corporate risk disclosures? The Indian experience," Journal of Business Research, Elsevier, vol. 121(C), pages 103-111.
    17. Gerrit Sarens & Giuseppe D’Onza, 2017. "The perception of financial analysts on risk, risk management, and internal control disclosure: Evidence from Belgium and Italy," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 14(2), pages 118-138, May.
    18. 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).
    19. Imen Derouiche & Riadh Manita & Anke Muessig, 2021. "Risk disclosure and firm operational efficiency," Annals of Operations Research, Springer, vol. 297(1), pages 115-145, February.
    20. Chandni Khandelwal & Satish Kumar & Riya Sureka, 2022. "Mapping the intellectual structure of corporate risk reporting research: a bibliometric analysis," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(2), pages 129-143, June.

    More about this item

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fan:frfrfr:v:html10.3280/fr2019-002002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stefania Rosato (email available below). General contact details of provider: http://www.francoangeli.it/riviste/sommario.aspx?IDRivista=163 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.