IDEAS home Printed from https://ideas.repec.org/a/bas/econst/y2025i1p45-62.html
   My bibliography  Save this article

Risk Disclosure and Debt Policy as Value Determinants of Small and Mid-Cap Firms

Author

Listed:
  • Nyoman Triaryati
  • Ubud Salim
  • Risna Wijayanti
  • Andarwati

Abstract

The firm has to figure out how to fulfil shareholder prosperity in an asymmetric information situation. Debt as a signal is expected to do so, but there is no consensus yet, and most of the studies only focused on large-cap firms, leaving small and medium-cap firms with a higher information gap. This study's aim is to gain a more comprehensive understanding of the firm value determinant under the situation. Risk disclosure is expected to be an effective way to increase firm value, as the predicted role of debt is to increase firm value despite the risk it creates. Using partial least square to 179 small mid-cap firms in the Indonesian Stock Exchange, this study proposes risk disclosure to mediate the relationship between debt and firm value. Risk disclosure mediates the effect of debt on firm value. Debt will effectively increase firm value as it is supported by risk disclosure because it raises the investor's expectations. This result suggested that small mid-cap firms provide adequate risk disclosure so that debt utilization could effectively increase the firm value.

Suggested Citation

  • Nyoman Triaryati & Ubud Salim & Risna Wijayanti & Andarwati, 2025. "Risk Disclosure and Debt Policy as Value Determinants of Small and Mid-Cap Firms," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 45-62.
    • Handle: RePEc:bas:econst:y:2025:i:1:p:45-62
    as

    Download full text from publisher

    File URL: http://archive.econ-studies.iki.bas.bg/2025/2025_01/2025_01_03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Issal Haj-Salem & Salma Damak Ayadi & Khaled Hussainey, 2020. "The joint effect of corporate risk disclosure and corporate governance on firm value," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(2), pages 123-140, September.
    2. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    3. Maizatulakma Abdullah & Zaleha Abdul Shukor & Zakiah Muhammadun Mohamed & Azlina Ahmad, 2015. "Risk management disclosure," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 16(3), pages 400-432, November.
    4. Eugene F. Fama & Kenneth R. French, 2008. "Dissecting Anomalies," Journal of Finance, American Finance Association, vol. 63(4), pages 1653-1678, August.
    5. Thi Ngoc Bui & Xuan Hung Nguyen & Kieu Trang Pham, 2023. "The Effect of Capital Structure on Firm Value: A Study of Companies Listed on the Vietnamese Stock Market," IJFS, MDPI, vol. 11(3), pages 1-20, August.
    6. repec:eme:bsppss:09657960210450754 is not listed on IDEAS
    7. Giovanna Michelon & Antonio Parbonetti, 2012. "The effect of corporate governance on sustainability disclosure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(3), pages 477-509, August.
    8. Allayannis, George & Weston, James P, 2001. "The Use of Foreign Currency Derivatives and Firm Market Value," The Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 243-276.
    9. Issal Haj Salem & Salma Damak Ayadi & Khaled Hussainey, 2019. "Corporate governance and risk disclosure quality: Tunisian evidence," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 9(4), pages 567-602, August.
    10. Masulis, Ronald W, 1983. "The Impact of Capital Structure Change on Firm Value: Some Estimates," Journal of Finance, American Finance Association, vol. 38(1), pages 107-126, March.
    11. Mirko S. Heinle & Kevin C. Smith, 2017. "A theory of risk disclosure," Review of Accounting Studies, Springer, vol. 22(4), pages 1459-1491, December.
    12. Xinshu Zhao & John G. Lynch & Qimei Chen, 2010. "Reconsidering Baron and Kenny: Myths and Truths about Mediation Analysis," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(2), pages 197-206, August.
    13. Core, John E., 2001. "A review of the empirical disclosure literature: discussion," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 441-456, September.
    14. Sherrena Buckby & Gerry Gallery & Jiacheng Ma, 2015. "An analysis of risk management disclosures: Australian evidence," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 30(8/9), pages 812-869, October.
    15. Petros Kalantonis & Christos Kallandranis & Marios Sotiropoulos, 2021. "Leverage and firm performance: new evidence on the role of economic sentiment using accounting information," Journal of Capital Markets Studies, Emerald Group Publishing Limited, vol. 5(1), pages 96-107, February.
    16. Allayannis, George & Ofek, Eli, 2001. "Exchange rate exposure, hedging, and the use of foreign currency derivatives," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 273-296, April.
    17. Tan, Youchao & Zeng, Cheng Colin & Elshandidy, Tamer, 2017. "Risk disclosures, international orientation, and share price informativeness: Evidence from China," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 29(C), pages 81-102.
    18. Ali Veysel, 2022. "Non-Financial Information Disclosures by Bulgarian Listed Companies," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 17-33.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Liao, Yulu & Huang, Paoyu & Ni, Yensen, 2022. "Convertible bond issuance volume, capital structure, and firm value," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    3. Mohamed Samy El-Deeb & Mohamed Fathy Allam, 2024. "The moderating effect of dividend policy on the relationship between the corporate risk disclosure and firm value: evidence from Egypt," Future Business Journal, Springer, vol. 10(1), pages 1-15, December.
    4. Mihaela Brindusa Tudose & Valentina Diana Rusu, 2018. "Analysis Of The Effects Of Financing And Risk Management On The Value Of Firms Listed On The Bucharest Stock Exchange," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 44-58, April.
    5. Timo Korkeamaki & Danielle Xu, 2015. "Institutional Investors and Foreign Exchange Risk," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-33, September.
    6. Minton, Bernadette A. & Schrand, Catherine, 2016. "Institutional investments in pure play stocks and implications for hedging decisions," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 132-151.
    7. Bartram, Söhnke M. & Brown, Gregory W. & Conrad, Jennifer, 2011. "The Effects of Derivatives on Firm Risk and Value," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(4), pages 967-999, August.
    8. Manhwa Wu & Paoyu Huang & Yensen Ni, 2020. "The Impact of Institutional Shareholdings on Price Limits," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(3), pages 343-361, September.
    9. Sara Faedfar & Mustafa Özyeşil & Mustafa Çıkrıkçı & Esin Benhür Aktürk, 2022. "Effective Risk Management and Sustainable Corporate Performance Integrating Innovation and Intellectual Capital: An Application on Istanbul Exchange Market," Sustainability, MDPI, vol. 14(18), pages 1-13, September.
    10. Roy Stein, 2016. "Review of the Reference Rate in Israel: Telbor and Makam Markets," Bank of Israel Working Papers 2016.12, Bank of Israel.
    11. 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).
    12. Monda, Barbara & Giorgino, Marco & Modolin, Ileana, 2013. "Rationales for Corporate Risk Management - A Critical Literature Review," MPRA Paper 45420, University Library of Munich, Germany.
    13. Kim, Sungjae F. & Chance, Don M., 2018. "An empirical analysis of corporate currency risk management policies and practices," Pacific-Basin Finance Journal, Elsevier, vol. 47(C), pages 109-128.
    14. Lel, Ugur, 2012. "Currency hedging and corporate governance: A cross-country analysis," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 221-237.
    15. Mark H. Lang & Karl V. Lins & Darius P. Miller, 2003. "ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm's Information Environment and Increase Market Value?," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 317-345, May.
    16. Choi, Jongmoo Jay & Jiang, Cao, 2009. "Does multinationality matter? Implications of operational hedging for the exchange risk exposure," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1973-1982, November.
    17. Ahmed A. Elamer & Collins G. Ntim & Hussein A. Abdou & Andrews Owusu & Mohamed Elmagrhi & Awad Elsayed Awad Ibrahim, 2021. "Are bank risk disclosures informative? Evidence from debt markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1270-1298, January.
    18. Dionne, Georges & El Hraiki, Rayane & Mnasri, Mohamed, 2023. "Determinants and real effects of joint hedging: An empirical analysis of US oil and gas producers," Energy Economics, Elsevier, vol. 124(C).
    19. Blake Loriot & Elaine Hutson & Hue Hwa Au Yong, 2020. "Equity-linked executive compensation, hedging and foreign exchange exposure: Australian evidence," Australian Journal of Management, Australian School of Business, vol. 45(1), pages 72-93, February.
    20. Bae, Sung C. & Kwon, Taek Ho & Park, Rae Soo, 2018. "Managing exchange rate exposure with hedging activities: New approach and evidence," International Review of Economics & Finance, Elsevier, vol. 53(C), pages 133-150.

    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    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:bas:econst:y:2025:i:1:p:45-62. 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: Diana Dimitrova (email available below). General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    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.