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The Value Relevance of Risk Disclosure: An Analysis of the Banking Sector

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  • Begoña Giner
  • Alessandra Allini
  • Annamaria Zampella

Abstract

The aim of this study is to test whether financial risk disclosures required by IFRS 7 and Pillar 3 are value relevant for investors to support them in their investment decisions. The sample in the study consists of banks listed on the London, Paris, Frankfurt, Madrid, and Milan Stock Exchanges over an 8-year period, from 2007 to 2014. Based on the aforementioned standards, we built financial risk disclosure indexes and distinguished different risk categories, qualitative and quantitative, as well as credit, liquidity, and market risk. Our analyses confirm that there is a positive association between bank value and several categories of established risk disclosures. Furthermore, it suggests that disclosure adds value to more traditional risk value measures. Besides, our results suggest that investors pay attention to the strength of the bank authority when using risk disclosures.

Suggested Citation

  • Begoña Giner & Alessandra Allini & Annamaria Zampella, 2020. "The Value Relevance of Risk Disclosure: An Analysis of the Banking Sector," Accounting in Europe, Taylor & Francis Journals, vol. 17(2), pages 129-157, July.
    • Handle: RePEc:taf:acceur:v:17:y:2020:i:2:p:129-157
    DOI: 10.1080/17449480.2020.1730921
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    Cited by:

    1. Emmadonata Carbone & Sara Saggese & Fabrizia Sarto, 2023. "La relazione tra l?esperienza degli amministratori e il business plan: un?indagine empirica sulle imprese quotate in Italia," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2023(1), pages 69-94.
    2. Khuthadzo Ramabulana & Riyad Moosa, 2022. "Disclosure of Risks and Opportunities in the Integrated Reports of South African Banks," JRFM, MDPI, vol. 15(12), pages 1-15, November.
    3. Anna Pilková & Michal Munk & Ľubomír Benko & Petra Blažeková & Jozef Kapusta, 2021. "Pillar 3: Does banking regulation support stakeholders’ interest in banks financial and risk profile?," PLOS ONE, Public Library of Science, vol. 16(10), pages 1-22, October.
    4. Francesca Manes Rossi & Luca Ferri & Annamaria Zampella & Adele Caldarelli, 2021. "La disclosure nei piani anticorruzione degli enti locali in Italia," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2021(3), pages 153-174.

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