Corporate risk reporting: Analysis of risk disclosures in the interim reports of public Portuguese non-financial companies

Abstract

<p class="Default">Fast changing environments, globalization, coupled with financial scandals, and the advance of in­formation technologies made corporate risk a very central issue in management and accounting. Current governance codes require that management disclose in annual reports its responsibility for the adequacy of risk management and internal control systems and the disclosure of risk and uncertainties faced by companies are required by both governance codes and corporate reporting. This study seeks to capture risk disclosure patterns adopted by public Portuguese companies in interim reports and to investigate whether the audit quality may explain the observed risk disclosures practices. Manual content analysis has been carried out in the interim reports of 35 non-financial Portuguese firms ranked by decreasing mar­ket capitalization to create indexes of corporate risk disclosure, which have been used for observing the tone of disclosure and for testing an explanatory model with proxies of audit quality together with other explanatory variables widely used in disclosure research. Results point out that quantified risk disclosure prevails in interim reports and that firm’s risk disclosure policies are not influenced by auditor’s quality. This work contributes to academic and regulatory environments, filling the gap about risk disclosure in the interim report, identifying the nature of corporate risk disclosures, assessing the quality of risk infor­mation and updating research about determinants of risk disclosure in interim reports.</p>

Corporate Governance and Risk Disclosure in Emerging Countries

“…Inappropriately, the study unveils that the good news are substantially higher than bad news. This practice might render the quality of disclosure inadequate and the result is in line with the prior findings [21].…”

“…These studies were conducted in both developed and emerging countries. Meanwhile, many prior studies [17][18][19][20][21][22][23] have called on the comparative studies among emerging countries and [24] emphases the study should focus on emerging countries that are situated in the African region. This study is responding to this request and would provide further insight on the risk disclosure and corporate governance literature.…”

Risk Information in Non-Financial Disclosure

“…Sound risk disclosure's main benefit for companies is, therefore, the reduction in information asymmetries (Deumes 2008;Deumes and Knechel 2008;ICAEW 2011;Linsley and Shrives 2000, 2006Schrand and Elliott 1998;Solomon et al 2000). Reducing information asymmetry through sound risk disclosure potentially leads to better allocation of capital in markets, increased transparency, and the consequent enhancement of economic efficiency (Serrasqueiro and Mineiro 2018). There are also, however, incentives to avoid risk disclosure, concerning mainly the cost of information preparation (Deumes and Knechel 2008;Solomon and Cooper 1990), together with the threat of litigation and loss of reputation (Deumes and Knechel 2008).…”

“…The fast-changing environments, globalization, and the improvement of information technologies made corporate risk a highly relevant issue in management and accounting (Serrasqueiro and Mineiro 2018). Moreover, several accounting scandals and the latest financial crisis have emphasized the prominence of the risk disclosure topic (e.g., Elshandidy et al 2018b;Singleton-Green 2012;Pérignon and Smith 2010).…”

Risk analysis of companies’ activities on the basis of non-financial and financial statements

“…O. Renn [21] характеризує нові виклики для аналізу ризиків. Португальські автори R. M. Serrasqueiro та Т. S. Mineiro [22] здійснюють аналіз розкриття інформації про ризики в проміжних звітах публічних португальських нефінансових компаній. Колектив пакистанських авторів S. H. Tahir та ін.…”