Risk management disclosure and risk premia of commercial banks in China: evidence from global systemic importance assessment indicators

This study examines how risk premia change in response to the disclosure of global systemic importance assessment indicators by commercial banks. We use both market-based and firm-level rational pricing perspectives from listed Chinese commercial banks from 2007 to 2022. The study constructs measure of market and firm-specific risk premia based on the capital asset pricing model. The results show that the disclosure of assessment indicators significantly reduces both types of risk premia. Mechanism analyses reveal that disclosure lowers the market risk premium by improving the information environment and reduces the firm-specific risk premium by limiting managerial incentives for excessive risk-taking. Heterogeneity analyses indicate that banks operating under higher economic policy uncertainty or in regions with greater financial marketization exhibit a more pronounced decline in market risk premia. Similarly, banks with stronger internal controls or higher leverage ratios experience a more substantial reduction in firm-specific risk premia. These findings offer valuable evidence to support enhanced disclosure regulations for commercial banks.