Risk reporting: a study of risk disclosures in the annual reports of UK companies.

Linsley, Philip and Shrives, Philip (2006) Risk reporting: a study of risk disclosures in the annual reports of UK companies. British Accounting Review, 38 (4). pp. 387-404. ISSN 0890-8389

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Official URL: http://dx.doi.org/10.1016/j.bar.2006.05.002

Abstract

The concepts of risk and risk management have received considerable attention lately, but this has yet to be reflected in empirical research examining firms’ risk reporting practices. This study seeks to address this gap in the literature and explores risk disclosures within a sample of 79 UK company annual reports using content analysis. A significant association is found between the number of risk disclosures and company size. Similarly a significant association is found between the number of risk disclosures and level of environmental risk as measured by Innovest EcoValue`21™ Ratings. However, no association is found between the number of risk disclosures and five other measures of risk: gearing ratio, asset cover, quiscore, book to market value of equity and beta factor. The paper also discusses the nature of the risk disclosures made by the sample companies specifically examining their time orientation, whether they are monetarily quantified and if good or bad risk news is disclosed. It was uncommon to find monetary assessments of risk information, but companies did exhibit a willingness to disclose forward-looking risk information. Overall the dominance of statements of general risk management policy and a lack of coherence in the risk narratives implies that a risk information gap exists and consequently stakeholders are unable to adequately assess the risk profile of a company.

Item Type: Article
Additional Information: Has made significant impact as the study has become an important international benchmark risk disclosure study for researchers. The hypotheses developed are original and rigorous and have not been previously tested. The paper is ranked 2nd in the top 25 ‘hottest articles’ (Jan-March: April-June 2007) for the British Accounting Review.
Subjects: N400 Accounting
Department: Faculties > Business and Law > Newcastle Business School > Business and Management
Depositing User: EPrints Services
Date Deposited: 15 Aug 2008 11:51
Last Modified: 20 Jun 2016 10:26
URI: http://nrl.northumbria.ac.uk/id/eprint/282

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