To read the full version of this content please select one of the options below:

An empirical investigation into market risk disclosure: is there room to improve for Italian banks?

Salvatore Polizzi (Department of Economics, Business and Statistics, University of Palermo, Palermo, Italy)
Enzo Scannella (Department of Economics, Business and Statistics, University of Palermo, Palermo, Italy)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 23 March 2020

Issue publication date: 21 July 2020

Downloads
354

Abstract

Purpose

This paper aims to examine the market risk disclosure practices of large Italian banks. The contribution provides insights on the way banks should provide information about market risk. The problem related to the asymmetric information between banks from one side, and investors and stakeholders on the other, represents a crucial issue that requires further considerations by scholars and regulators.

Design/methodology/approach

This contribution adopts a mixed methodological approach to analyse both qualitative and quantitative profiles of market risk disclosure in banking. This paper analyses the most important documents Italian banks are required to prepare for risk disclosure purposes, namely the management commentary, the Basel Pillar 3 disclosure report and the notes.

Findings

The results show that banks do not fully exploit the potentialities of management commentary and Pillar 3 disclosure report. Various areas of information overlapping between the different financial reports worsen the overall comprehensibility and relevance of bank risk reporting.

Practical implications

The reduction of the information overlapping, the careful choice of the location of the information and more appropriate use of the management commentary to provide qualitative information about market risk strategies represent crucial areas of improvement banks and regulators should take into account.

Originality/value

Providing an in-depth analysis of the market risk disclosure practices of a sample of large Italian banks, this paper detects the main drawbacks of their market risk reporting and provides useful recommendations to improve it.

Keywords

Acknowledgements

The authors thank the participants of the Bangor Business School Research Seminar Series and two anonymous referees for useful comments and suggestions.

Citation

Polizzi, S. and Scannella, E. (2020), "An empirical investigation into market risk disclosure: is there room to improve for Italian banks?", Journal of Financial Regulation and Compliance, Vol. 28 No. 3, pp. 465-483. https://doi.org/10.1108/JFRC-05-2019-0060

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited