Does Operational Risk Disclosure Quality Increase Operating Cash Flows?

Abstract

This study aims to measure the degree of operational risk disclosure and examine its impact on operating cash flow of banks listed on the UAE financial markets: Abu Dhabi Stock Exchange (ADX) and Dubai Financial Market (DFM) during the period 2009-2013. The authors conduct the content analysis of the annual reports to measure the degree of the operational risk disclosure. In addition, they use the panel data regressions to analyze the impact of the operational risk disclosure on the operating cash flow generated by the banks. The results show low degree of the operational risk disclosure of all, Islamic and conventional UAE banks. In addition, the results show that the higher the disclosure of operational risk the higher the cash flow of conventional banks. The operational risk disclosure of the Islamic banks has not been examined by any of the prior researches. In addition, this paper examines the potential impact of the operational risk disclosure on the operating cash flow generated by the banks.

Keywords: Operating Cash Flow; Operational Risk Disclosures; Annual Reports; Dynamic Panel Data Analysis

JEL Classification: C33; G32; G34