Are Bank Risk Disclosures Informative? Evidence From Debt Markets

International Journal of Finance and Economics, 2020

41 Pages Posted: 11 Jul 2020

See all articles by Ahmed A. Elamer

Ahmed A. Elamer

Brunel University London - Brunel Business School; Department of Accounting, Faculty of Commerce, Mansoura University

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Hussein Abdou

The Lancashire School of Business & Enterprise; Department of Management, Faculty of Commerce, Mansoura University

Andrews Owusu

Coventry University - School of Economics, Finance and Accounting, Faculty of Business and Law

Mohamed Elmagrhi

Swansea University, School of Management; University of Huddersfield, Huddersfield Business School, Queensgate, Huddersfield, HD1 3DH; University of Huddersfield - Business School

Awad Ibrahim

University of Portsmouth - Portsmouth Business School, Students

Date Written: June 18, 2020

Abstract

This study examines whether financial reporting with a specific focus on risk disclosures have a predictive (informative) effect on banks’ credit ratings (BCRs) and, consequently, ascertains whether governance structures can moderate such an association. Using one of the largest bank-level datasets collected from 12 Middle East and North African (MENA) countries over the 2006-2013 period to-date, our findings are as follows. First, we find that risk disclosures have a predictive effect on BCRs. Second, we find that the relationship between risk disclosures and BCRs is contingent on the quality of governance structures. Specifically, we find that the informativeness of risk disclosures on BCRs is higher in banks with larger board size, greater independence, higher government ownership, and better Shariah supervisory board, but lower in banks with greater block ownership, higher foreign ownership and the presence of CEO duality. The central tenor of our findings remains unchanged after controlling for a number of firm- and country-level factors, alternative risk disclosure measures, firm- and national-level governance proxies, different types of banks, and potential endogeneities. The findings have important implications for investors, especially bondholders, standard-setters, regulators, and central governments.

Keywords: Financial Reporting, Risk Disclosures, Banks’ Credit Ratings, Debt Markets, Governance Structures, MENA

JEL Classification: G21, G24, G32, G34, G38, M48

Suggested Citation

Elamer, Ahmed Ahmed and Ntim, Collins G. and Abdou, Hussein and Owusu, Andrews and Elmagrhi, Mohamed and Ibrahim, Awad, Are Bank Risk Disclosures Informative? Evidence From Debt Markets (June 18, 2020). International Journal of Finance and Economics, 2020, Available at SSRN: https://ssrn.com/abstract=3630604

Ahmed Ahmed Elamer (Contact Author)

Brunel University London - Brunel Business School ( email )

Kingston Lane
Eastern Gateway Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

Department of Accounting, Faculty of Commerce, Mansoura University ( email )

Faculty of Commerce, Mansoura University
Elgomhouria St.
Mansoura, Mansoura 35516
Egypt

Collins G. Ntim

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

Hussein Abdou

The Lancashire School of Business & Enterprise ( email )

The Lancashire Law School
Corporation Street
Preston, PR1 2HE
United Kingdom
00441772894700 (Phone)

Department of Management, Faculty of Commerce, Mansoura University ( email )

Mansoura, 35516
Egypt

Andrews Owusu

Coventry University - School of Economics, Finance and Accounting, Faculty of Business and Law ( email )

Priory Street
Coventry
United Kingdom

Mohamed Elmagrhi

Swansea University, School of Management ( email )

Bay Campus
Skewen
Swansea, SA1 8EN
United Kingdom
07455392947 (Phone)

University of Huddersfield, Huddersfield Business School, Queensgate, Huddersfield, HD1 3DH ( email )

HD1 3DH
United Kingdom
07455392947 (Phone)

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

Awad Ibrahim

University of Portsmouth - Portsmouth Business School, Students ( email )

Portsmouth
United Kingdom

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