Corporate Risk Disclosure: A Review

Abstract

This paper reviews empirical studies and professional literature on corporate risk disclosures. Empirical studies done from the perspective of economic theory with application of statistical techniques have been growing over the years in the field of corporate disclosures. The very concept of risk and significance of corporate risk disclosures have been discussed in various studies and reports of professional bodies. Studies of corporate risk disclosures from the perspective of information asymmetry, utility as well as the perspective of economic theories of corporate governance have been steadily increasing over the last two decades or so. Associations between various firm characteristics and market behaviour have been sought to be studied by scholars in order to study the possible motivations behind risk disclosures as well as their usefulness to the end users of corporate disclosures viz. the shareholders, current and prospective investors, as well as the regulators. Methodologies from various disciplines like communications studies, econometrics, statistics, computer science etc. have been employed to study the phenomenon of corporate risk disclosure and its interaction with factors within and without the firm. Studies have been conducted for some jurisdictions in North America, Europe, Asia and Africa and scope exists for further study in more jurisdictions. The findings of empirical studies and discussions in professional literature are key aids for law and policy makers and researchers while formulating or proposing regulatory frameworks. This review paper aims to stimulate further research and debate on regulatory approach, policy and frameworks towards corporate risk disclosure based upon the conclusions drawn from empirical studies on corporate risk disclosure.

Keywords: Risk disclosure; Risk reporting; Corporate risk disclosure; Corporate risk reporting; Risk management; Corporate disclosure

JEL Classification: K22, G34, G32