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    Determinants and impacts of risk disclosure quality: evidence from China

    Neri, Lorenzo and Elshandidy, T. and Guo, Y. (2018) Determinants and impacts of risk disclosure quality: evidence from China. Journal of Applied Accounting Research , ISSN 0967-5426. (In Press)

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    Abstract

    Purpose Few studies have focused on emerging markets owing to difficulties in identifying the real effect of disclosures on these economies. To fill this gap, this paper investigates the main drivers for risk disclosure quality for Chinese financial firms, and further studies the impact of such disclosure on market liquidity. Design/methodology/approach The sample comprises all financial firms listed in the Shanghai A-shares market for the period 2013-2015. By relying on manual content analysis of annual reports, the risk disclosure quality is measured through a multidimensional approach which encompasses three factors: quantity of disclosure, coverage of disclosure, and the semantic properties of depth and outlook. The findings of this paper are based on ordinary least squares (OLS) and fixed-effects estimations. Findings Our findings suggest that firm characteristics (especially size) influence risk disclosure practices of Chinese financial companies. Furthermore, we found that risk disclosure quality has an impact on market liquidity, and when we analysed each year we noticed that the results were driven by the year 2013; moreover, we noticed no or little significance from the period of the emerging financial crisis. Research limitations/implications The sample of this paper is limited to financial firms in China. The usage of manual content analysis limits our ability to investigate risk reporting drivers and its impact on market liquidity on a large scale. Practical implications The importance of this paper stems from documenting several reporting incentives concerning not only firms’ quantity, but also firms’ quality of risk reporting. Collectively, our findings support activism for reforms and the enhancement of regulations in China in order to make the market more efficient. Originality/value This paper provides new evidence for financial companies in China on the principal drivers for risk disclosure quality and highlights how the quality of such disclosure impacts market liquidity. Furthermore, this paper confirms previous findings on the Chinese market (Ball et al., 2000; Zou and Adams, 2008) in which, given a decreasing but still strong state presence, there is higher stock volatility and weak corporate governance.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Chinese market, Emerging markets, Financial institutions, Quantity and quality, Risk disclosure
    School: Other
    Divisions > Other
    Depositing User: Lorenzo Neri
    Date Deposited: 11 Apr 2018 13:13
    Last Modified: 09 Feb 2021 23:48
    URI: https://eprints.bbk.ac.uk/id/eprint/21889

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