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The purpose of this paper is to examine risk disclosures by UK companies within their annual reports. Tests are performed to measure the level of the readability of the risk disclosures and to assess whether directors are deliberately obscuring bad risk news.

The paper draws upon methodologies developed in prior empirical studies of annual report readability. Thus it uses the Flesch Reading Ease formula to measure the readability of the risk disclosures and coefficients of variation are used to measure obfuscation. A content analysis approach is adopted to identify risk disclosures.

The paper finds that the mean Flesch reading ease ratings for the sample companies are all below 50 indicating that the level of readability of the risk disclosures is difficult or very difficult and this supports prior research examining the readability of sample passages in annual reports. No evidence is found to suggest that directors are deliberately obfuscating or concealing bad risk news through their writing style.

The paper also finds that the Flesch reading ease ratings measure the readability, not the understandability, of disclosures and whilst actions can be taken to minimise problems associated with reliability when performing content analysis they cannot be wholly eliminated.

The paper shows that there have been calls for improved risk disclosures to enable stakeholders to better understand a company's risk position. Requiring directors to issue extra risk information will not, however, lead to enhanced risk communication unless the readability of the risk disclosures is also improved.

In this paper it is shown that there have been no prior studies that focus upon testing for readability and obfuscation in risk disclosures. It is important that transparent risk information is provided to the marketplace and therefore this study is valuable in its examination of the clarity of communication of published risk information.

This study aims to investigate the effect of mandatory international financial reporting standards (IFRS) adoption on the risk disclosure quality by listed European insurers.

The study used a content analysis of the annual reports and consolidated accounts of 13 insurance companies listed in the European market between 2002 and 2007 based on two regulatory frameworks, Solvency and IFRS.

The results showed a significant effect of the mandatory adoption of IFRS and a clear improvement in the quality of risk disclosure. Moreover, risk disclosure is positively associated with the size of the company.

The authors can consider the relatively limited size of the sample as a limitation of this study. Moreover, the manual content analysis used to be considered subjective.

The findings of this study provide useful insights to professional and regulatory bodies about the consequences of IFRS adoption to enhance transparency and particularly risk disclosure.

The research contributes to the existing literature. First, the authors have shown that companies are improving in the quality of risk disclosure even before 2005. Second, the authors have shown that the year 2005 is distinguished by a marked improvement in disclosure trends, with companies aligning themselves with coercive and mimetic regulatory forces. Third, the authors highlight the significant effect of mandatory IFRS adoption even in highly regulated industries, such as the insurance industry.

This paper examines the impact of founder ownership concentration (FOC) on risk disclosures. It further investigates the moderating role of risk governance in the association between FOC and risk disclosures.

We use data from the top 200 Indian listed firms as our sample and rely on ordinary least squares (OLS) for our results. In addition, we use the propensity score matching, Heckman selection model and instrumental variable estimates for robustness checks.

We find that FOC decreases the risk disclosures. However, the effectiveness of risk management committee composition (risk governance) mitigates the negative influence of FOC on risk disclosures.

The paper is built on the agency theory. Based on the agency theory, the ownership concentration has two implications: first, it reduces the conflicts between managers and shareholders. Here, the managers act in favour of shareholders and therefore, brings more risk disclosers. Second, it invites conflicts between controlling and minority shareholders. The study is, therefore, interesting to see the cost and benefits of FOC on risk disclosures.

The study has practical implications for the regulatory bodies to encourage risk disclosures and benefit the outsiders of the firm. It also has implications for the companies to see the benefits of risk management committee as improved risk governance.

It contributes to the literature of risk disclosures and risk governance in emerging economies. It is the first study to investigate the role of risk governance in mitigating the adverse effects of founder’s ownership on risk disclosures in developing economies. It also contributes to the theory of agency cost and information asymmetry.

Private company investors operate in unique environments. Seed equity investors, which generally include venture capitalists and angel investors, often have the particularly unusual role of becoming involved in the oversight of the investee company. This continuing involvement with the investee firm introduces conflicting interests: the desire to maximize the profit from the investment, but also the desire to maintain a positive relationship with the entrepreneur(s) (consistent with the theory of upper echelons/strategic management). We discuss in detail this unusual investment context and the role that accounting disclosures can have in this environment. We predict that accounting disclosures can influence the tradeoff between the profit motive and the relationship motive. Using 64 experienced angel investors as participants in a realistic experimental setting, we find that disclosures indicating conservatively biased accounting choice and lower account risk (variance) lead to angels increasing the valuation of the target firm and forgoing higher profits. Increasing the valuation serves to foster the relationship with the entrepreneur(s). Our findings have implications for entrepreneurs making choices about discretionary disclosures and for standard setters; we also inform theory related to overcoming anchoring.

The purpose of this study is to evaluate whether the amendments to International Accounting Standard (IAS) 39 and the introduction of International Financial Reporting Standards (IFRS) 9 enhanced the readability, and thus the quality and usefulness of risk disclosure information.

Readability analyses are performed on companies listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2021. The sample period includes the period when companies disclosed information according to IAS 39 (2005–2017) and IFRS 9 (2018–2021).

The results of the analyses show risk disclosures for JSE-listed companies to be complex and difficult to understand. Furthermore, risk disclosures have become longer and less readable with the introduction of amendments to IAS 39 and the introduction of IFRS 9.

This study uses readability measures as a proxy for the complexity and usefulness of risk disclosures. The amount of utility a user of financial statements derives could be dependent on other factors such as the quality of disclosure, individual user background and perceptions.

The results have valuable implications for the various stakeholders that make use of the information contained in financial statements. Stakeholders such as regulators and standard setters should carefully assess how accounting standards change to ensure that one of the key objectives of the IASB, namely, to provide information that is relevant, reliable and understandable, is met.

The results of this study contribute to the discourse on the usefulness of companies’ risk disclosures. Though, to the best of the authors’ knowledge, this is the first study to compare the readability of risk disclosures from an emerging market perspective, the results can be applied to other countries using IFRS to assess the readability of risk disclosures.

This study aims to evaluate the adequacy of climate risk disclosure by providing empirical evidence on whether corporate disclosure meets rising stakeholders’ demand for risk disclosure concerning climate change.

Drawing on a triangulated approach for collecting data from multiple sources in a longitudinal study, we perform a panel regression analysis on a sample of multinational firms between 2007 and 2021. Inspired by the Global Reporting Initiative (GRI) principles, our innovative and inclusive model of measuring firm-level climate risks underscores the urgent need to redefine materiality from a broader value creation (rather than only financial) perspective, including the impact on sustainable development.

The findings of this study provide evidence of limited corporate climate risk disclosure, indicating that organisations have yet to accept the reality of climate-related risks. An additional finding supports the existence of a nexus between higher corporate environmental disclosure and higher corporate resilience to material financial and environmental risks, rather than pervasive sustainability risk disclosure.

We argue that a mechanical process for climate-related risk disclosure can limit related disclosure variability, risk reporting priority selection, thereby broadening the short-term perspective on financial materiality assessment for disclosure.

This study extends recent literature on the adequacy of corporate risk disclosure, highlighting the importance of disclosing material sustainability risks from the perspectives of different stakeholder groups for long-term success. Corporate management should place climate-related risks at the centre of their disclosure strategies. We argue that reducing the systematic underestimation of climate-related risks and variations in their disclosure practices may require regulations that enhance corporate perceptions and responses to these risks.

This study emphasises the importance of reconceptualising materiality from a multidimensional value creation standpoint, encapsulating financial and sustainable development considerations. This novel model of assessing firm-level climate risk, based on the GRI principles, underscores the necessity of developing a more comprehensive approach to evaluating materiality.

Using market-risk disclosures as an empirical context, and drawing on the diffusion of innovations (DOIs) model, this paper contributes new sociological perspectives to a theorization of compliance. We propose that stakeholder behaviors during accounting standard-setting discussion and adoption phases are motivated by social, political, and economic factors. These phases interrelate, and consequently, any analysis of managerial disclosure decisions benefit from considering them together, rather than in isolation, as is typical.

The authors use a mixed-methods design, including detailed analysis of semi-structured interviews (n = 26), constituents’ comment letters (n = 106), annual report disclosures (FTSE 350: firm-year observations n = 1,131), technical meetings, and standard-setting documents.

Results suggest that constituents initially supported introduction of a set of mandatory market-risk disclosures, but implied costs of the proposed and subsequently approved requirements outweighed perceived benefits and efficiencies. This study elaborates on these issues, exploring how and why a financial reporting innovation that stakeholders deemed technically inefficient was diffused. Although the authors were told that compulsion (i.e., forced-selection) dominates disclosure decisions, some freedom of choice remains, as evidenced by greater than 40% non-compliance during the first year of adoption. Respondents indicate that theoretically, market-risk disclosure adoption decisions rest on assessment of the costs of disclosure (e.g., preparation and competition) versus non-disclosure (e.g., litigation and reputation). Second-phase adoption is more straightforward because the costs of disclosure decrease over time.

Although mixed-methods research offers several advantages, self-selection bias, issues with coding reliability, and interviewer/interviewee bias are possible. It is impossible to achieve a truly holistic understanding of standard-setting, and therefore the authors acknowledge that findings are not generalizable, though the risks were minimized.

Recognizing that disclosure choices are not made in political and social vacuums, this study suggests that sociological perspectives such as innovation-diffusion inform a theory of compliance.

This study uses an experimental approach to examine how the perceptions and decisions of prospective nonprofessional investors are influenced by risk disclosures in the Management Discussion and Analysis (MD&A). The between-subjects experiment used 157 MBA students as nonprofessional investors. The participants were given a firm's financial statements. In addition, the experimental group received the section on risk in the MD&A, whereas the control group did not receive any part of the MD&A. The participants were then asked to make several investment assessments and a final investment decision. The results show that the information included in the risk section of the MD&A has a significant negative effect on perceptions of the firm's future performance, a significant positive influence on perceptions of the stock's risk, and a marginally significant negative effect on the investment decision. The effect on the investment decision is mediated by respondents' perceptions of the firm's future performance and stock risk. By providing evidence on the effect of risk disclosures on nonprofessional investors' investment decision-making process, this study can help professional bodies and national market regulators understand how some market participants react to risk information provided under their regulations. In fact, the results indicate that there is little to be gained by firms voluntarily providing these risk disclosures. This would seem to support the fact that disclosure of risk information needs to be mandated by market regulators.