The effect of the financial crisis on risk disclosures: a comparative study of U.S. and Canadian corporations

Abstract

The effect of the financial crisis on enterprise risk management (ERM) disclosures was examined through a content analysis of the 2007 and 2008 annual reports of S&P 500 and S&P- TSX Composite companies in the energy, materials, industrials, and consumer discretionary sectors. Fourteen types of risk were tracked and categorized. The total number of risk disclosures by S&P 500 companies hardly increased at all from 2007 to 2008, while the total number of risk disclosures by TSX companies increased slightly. Overall, the 2008 financial crisis has not had a major impact, if any, on risk disclosures by major non-financial U.S. and Canadian corporations

Enterprise Risk Management in the US Banking Sector Following the Financial Crisis

“…Our finding are not consistent with the findings of Maingot et al [10]- [12] who reported very few changes in the assessment of risk exposure, consequences and ERM strategies in the Canadian financial and non-financial corporations and in the US non-financial corporations. While these research studies reflect the poor communication strategies concerning ERM for their particular samples, our findings show significant changes in the as-sessment of ERM after the crisis, and this may reflect the efficiency and the credibility of the ERM disclosure strategies utilized by the largest US banks.…”

“…3) List of risks and categories in the banking sector After examining ERM information disclosed in the annual reports of the US largest banks through the 4 year period of investigation, we identified a list of 15 types of banking risks and classified them according to three categories [12]- [35]:…”

“…Among these studies we can find Maingot et al [5] [10]- [12]) who have investigated the effect of the crisis on the level of risk exposure, consequences and risk management strategy in the Canadian and U.S. context. Maingot et al [10] investigated the effect of the crisis on risk management disclosures by non-financial Canadian companies listed on the S&P TSX composite index using a content analysis of the annual reports for the years 2007/2008.…”

“…They found very few changes in the disclosure of the level of risk exposure, consequences and management which confirmed the results of the prior study. Maingot et al [12] conducted a comparative study of the disclosed level of risk between Canadian and US companies. The same findings were reported for a sample of non-financial US and Canadian companies.…”

“…We then adopted the same approach used in the articles of Lajiliand Zéghal [33] and Maingot et al [5] [10] [11], [12] who developed a risk map useful for evaluating the level of risk exposure, consequences and management. This approach is presented in Table 3.…”