Risk disclosures and firm value: the role of governance in an emerging market
29 Apr 2021-International Journal of Productivity and Performance Management (Emerald Publishing Limited)-
TL;DR: In this article, the impact of risk disclosures on firm value was investigated and the effect of effective governance on the relation between risk disclosures and the firm value is investigated in the context of an emerging economy.
Abstract: PurposeThe objective of this paper is to investigate the impact of risk disclosures on firm value. We further investigate whether effective governance moderates the relation between risk disclosures and firm value.Design/methodology/approachWe use a sample of the top 200 Indian listed firms on NSE from 2013 to 2018. The generalised method of moments (GMM) along with the ordinary least square (OLS) is used to investigate our research problem. Further, we use the Propensity Score Matching (PSM) technique and the Heckman selection model for correcting selection bias in the robustness section.FindingsWe find that higher risk disclosures result in lower firm value. Besides, we show that better governance minimizes the negative impact of risk disclosures on firm value. This finding encourages firms to have a good governance mechanism to mitigate the adverse effects of risk disclosures in public.Originality/valueThe main contribution of our paper is to examine the moderating effect of governance between risk disclosures in the annual report and firm value (market-based and accounting-based) in the context of an emerging economy. Moreover, the paper highlights the potential moderating effect of independent directors and resourceful boards on the risk disclosures and firm value in the Indian context.
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TL;DR: In this article , a systematic review of literature on corporate risk disclosure (CRD): meaning, measures of quality of CRD and directions for future research was provided by obtaining journals from the Association of Business Schools (ABS) 2021 journal ranking guide.
Abstract: Abstract This paper provides a systematic review of literature on corporate risk disclosure (CRD): meaning, measures of quality of CRD and directions for future research. This was achieved by obtaining journals from the Association of Business Schools (ABS) 2021 journal ranking guide. The next step involved a detailed search on journal databases to identify how the word “quality” and the term “corporate risk disclosure” have been used. The search produced 59 accounting and non-accounting articles published between 2004 and 2021. The findings show that there is an increase in the number of studies on quality of CRD during the study period. The study also found that there are two perspectives commonly used to conceptualise quality of CRD, namely pre-modern and modern perspectives. In addition, there is no uniform basis to study and measure quality of CRD. The paper encourages researchers to precisely state their perspective of risk before engaging in quality of CRD research for their output to be meaningful. The study generates important insights for regulators and policymakers when measuring quality of CRD.
3 citations
TL;DR: In this article , the authors examined the impact of corporate risk disclosures (CRD) and board-centered corporate governance (CG) constructs such as board size, board meetings attended, number of female directors on board, and CEO duality on firm value.
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TL;DR: The authors argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. But they do not consider the role of decision agents in these organizations.
Abstract: ABSENT fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.1 Our goal is to explain the survival of organizations characterized by separation of "ownership" and "control"-a problem that has bothered students of corporations from Adam Smith to Berle and Means and Jensen and Meckling.2 In more precise language, we are concerned with the survival of organizations in which important decision agents do not bear a substantial share of the wealth effects of their decisions. We argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. We contend that separation of decision and risk-bearing functions survives in these organizations in part because of the benefits of specialization of
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TL;DR: In this article, the authors analyze the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions and argue that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk-bearing but also because of an effective common approach to controlling the implied agency problems.
Abstract: This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of ownership and control. Such separation of decision and risk bearing functions is also common to organizations like large professional partnerships, financial mutuals and nonprofits. We contend that separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing but also because of an effective common approach to controlling the implied agency problems. In particular, the contract structures of all these organizations separate the ratification and monitoring of decisions from the initiation and implementation of the decisions.
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TL;DR: A review and critique of the positive accounting literature following the publication of Watts and Zimmerman (1978, 1979) can be found in this paper, which suggests ways to improve positive research in accounting choice.
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