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The growing business complexity has caused many risks (e.g. operational, financial, reputational, cybersecurity, regulatory and compliance) that threaten companies' sustainability and have received attention from regulators, investors, and businesses. The authors present a model for assessing and reporting corporate risk by examining the indicators underlying corporate risk reporting.

A thorough review of the literature and semi-structured interviews with experts were conducted and the fuzzy Delphi technique was used to obtain consensus and screening of risks. The relationships between these risk indicators were recognized, weighted and prioritized by employing a hybrid Decision Making Trial and Evaluation Laboratory Model (DEMATEL) method integrated with Analytic Network Process (ANP) (DEMATEL-ANP [DANP]) approach. Finally, using the Iranian setting of corporate risk reporting, a model was developed to calculate the risk-reporting scores.

The results indicate that risk disclosure quality is more important than risk disclosures' textual properties and quantity. According to the experts, reporting the key risks that the company faces, management's approach to dealing with these risks and quantifying their impact are more important than the other indicators. The results also show that risk reporting in Iran lacks quantitative and specific information, and most risk disclosures are sticky.

The data have been prepared and analyzed according to the unique Iranian reporting environment, which should be considered when interpreting the results.

The results of this research can be used by the regulators of the Stock Exchange Organizations (SEO) to evaluate corporate risk reports and rank companies. Results are also relevant to investors and policymakers to identify companies with poor risk disclosure and to take necessary measures to improve their reporting practices.

This paper contributes to the social and governance literature by presenting the importance of risk reporting in corporate disclosures.

The unique Iranian setting of corporate risk reporting furthers the understanding of risk reporting and thus provides education, policy, practice and research implications for other emerging economies like Iran. Many prior studies focus mainly on the quality of risk disclosure, and other aspects of corporate risk disclosure presented in the study have remained largely overlooked. The corporate risk reporting attributes identified in the study are relevant to the rise of non-financial risks, the textual and qualitative nature of risk reporting and textual risk disclosures.

Exploiting the mandatory provision of integrated reporting in South Africa, this paper aims to investigate whether this regulatory switch from the conventional annual report is associated with differences in the level of textual risk disclosure (TRD). This paper also examines the economic usefulness of this regulatory change by observing the impact of TRD on the complying firms’ market values.

Archival data are collected and examined using time-series difference design and difference-in-differences design.

The authors find that the level of TRD within the mandatory integrated reporting is significantly lower than that of annual reports. The authors find that the impact of TRD in integrated reporting on market value compared to that of annual reports is statistically not different from zero. The authors’ further analyses suggest that corporate governance effectiveness is not a moderating factor to the study results. The results are robust to comparisons with the voluntary adoption of integrated reporting in the UK.

Collectively, the study results suggest that managers’ adherence to the mandatory provision of integrated reporting has significantly decreased the level of (voluntary) TRD they tended to convey within the conventional annual reports, resulting in a trivial impact on market value. These unintended consequences should be of interest to the International Integrated Reporting Council and other bodies interested in integrated reporting.

The purpose of this study is to examine the association between two reporting mechanisms used by managers to communicate risk information to the capital market: risk disclosure and earnings smoothing.

This study juxtaposes two competing hypotheses, the “opportunistic” and the “signaling”, and empirically investigates whether one dominates the other for a sample of large UK firms for the period 2005–2015. This study also uses the global financial crisis as an arguably exogenous shock on overall risk in the economy to investigate its effect on managers' joint use of textual risk disclosures and earnings smoothing.

This study finds that risk disclosure and earnings smoothing are negatively associated. This finding supports that managers with incentives to mask the firm’s true underlying risk through smoothing earnings provide lower levels of risk-related disclosures. This study documents that the trade-off between risk disclosure and earnings smoothing is more pronounced during the global financial crisis period than before and after the crisis period. Further, this study demonstrates a more negative association for firms with higher volatility of cash flows. This negative association is robust to various model specifications, additional corporate governance related controls and an alternative measure of earnings smoothing.

The findings provide new empirical evidence about the association between risk disclosure and earnings smoothing and support the opportunistic hypothesis, especially when firms are faced with increased risk.

This paper aims to provide unique interdisciplinary research evidence between the risk information disclosed by auditors and the risk information disclosed by corporate managers. In particular, it investigates the association between the level of risk information disclosed by auditors (key audit matters [KAMs]) and the level of corporate narrative risk disclosure.

The study sample consists of the UK FTSE all-share non-financial firms across six financial years. The authors use a computer-aided textual analysis, and the authors use a bag of words to score the sample annual reports.

The results suggest that KAMs and corporate narrative risk disclosure levels vary across the industries. The authors found a significant positive association between the risk information disclosed by auditors and the risk information disclosed by corporate managers. Also, the authors found that FTSE 100 firms exhibit higher significance between the ongoing concern and the level of narrative risk disclosure.

The study approach helps assess the level of management risk reporting behaviour due to the new auditor risk reporting standards. This helps to emphasise how auditors and companies engage and communicate risk-related information to stakeholders. Standard setters should suggest a more detailed reporting framework to protect the shareholders. The unique findings are incredibly beneficial to the regulators, standard setters, investors, creditors, suppliers, customers, decision makers and academics.

This paper provides a shred of extraordinary evidence of the impact of auditor risk reporting and management risk reporting. To the best of the authors’ knowledge, no study has yet investigated the corporate narrative disclosure after the new audit standards ISA 700 and ISA 701.

In an effort to make audit reports more informative to users, the Public Company Accounting Oversight Board and the International Auditing and Assurance Standards Board adopted a standard that requires auditors to disclose key audit matters (KAMs). This paper aims to explore the impact of the risk information provided by KAMs on corporate debt contracting.

In China, the KAM standard went into effect for A + H cross-listing companies in 2017 and became mandatory for all listed companies in 2018. This study takes this as an exogenous shock to examine the impact of the KAM disclosures on debt contracting. This study also designs a path analysis to open the “black box” between the risk information in KAMs and the risk perception of creditors. Moreover, This study conducts a textual analysis on the KAMs information based on samples after the release of the KAM standard.

This study conducts difference-in-difference tests and find that the KAM disclosures decrease interest rates and increase the proportion of long-term debt. Path analyses reveal that the KAM disclosures lead to more favorable debt characteristics through decreasing information asymmetry. This study also finds that the more KAMs are disclosed, the more favorable debt characteristics are and that different categories of KAMs have different effects on debt contracting.

This paper highlights the benefits of KAM disclosures, which are consistent with the convergence argument of risk information disclosures. Investors’ reactions to KAMs are mixed because of the differences in how professional investors and nonprofessional investors interpret information. This study provides evidence of incrementally informative nature of KAMs from the perspective of debt holders, who are professional information users.

The study investigates how firm-level governance (FL_G) affects the disclosure of voluntary risk information. Likewise, it explores the influence of FL_G on the informativeness of voluntary risk disclosure (VRD). Specifically, it examines how FL_G shapes the nexus between VRD and firm value.

It uses a sample of non-financial firms from the FTSE350 index listed on the London Stock Exchange between 2010 and 2018. The authors utilise an automated textual analysis technique to code the VRD in the annual reports of these firms. The firm value, adjusted for the industry median, is a proxy for investor response to VRD.

The results suggest that UK firms with significant board independence and larger audit committees disclose more risk information voluntarily. Nevertheless, firms with larger boards of directors and higher managerial ownership disseminate less voluntary risk information. Besides, VRD contains relevant information that enhances investors' valuation of UK firms. These results are more pronounced in firms with higher independent directors, lower managerial ownership and large audit committees.

The study rationalises the ongoing debate on the effect of FL_G on VRD. The findings are helpful to UK policy-setters in reconsidering the guidelines that regulate UK VRD and to the UK investors in considering risk disclosure in their price decisions and thus enhancing their corporate valuations.

It contributes to the risk reporting literature in the UK by presenting the first evidence on the effect of a comprehensive set of FL_G on VRD. Besides, it enriches the existing research by shedding light on the role of FL_G on the informativeness of discretionary risk information in the UK.

This paper provides a wide-ranging and up-to-date (1997–2016) review of the archival empirical risk-reporting literature. The reviewed papers are classified into two principal themes: the incentives for and/or informativeness of risk reporting. Our review demonstrates areas of significant divergence in the literature specifically: mandatory versus voluntary risk reporting, manual versus automated content analysis, within-country versus cross-country variations in risk reporting, and risk reporting in financial versus non-financial firms. Our paper identifies a number of issues which require further research. In particular we draw attention to two: first, a lack of clarity and consistency around the conceptualization of risk; and second, the potential costs and benefits of standard-setters’ involvement.

This paper aims to gauge the quality of risk disclosure in 3,872 annual reports of Indian corporates, using a risk disclosure index (RDI) developed to capture both quality and quantity of risk disclosures.

Focussing on 69 risk items, the paper uses manual textual analysis and scores risk items using an ordinal scale, as opposed to the general practice of using a dichotomous scale.

The average risk index is low, but greater in the post-recession period than in the pre-recession period. Most disclosures are qualitative, both backward and forward-looking, and exhibit a negative tone. In addition, company age and industry sector have a significant impact on disclosure levels.

The choice and weighting of semantic qualities used to construct RDIs used in disclosure studies are inherently subjective. This exploratory study uses univariate analysis and does not explore the reasons for poor disclosure.

In addition to its usefulness for investors and companies’ management, the findings of non-compliance with certain mandatory provisions and a low average RDI is particularly relevant for policymakers and regulatory bodies.

Development of a summary measure/RDI that is novel in its differential weighting of the semantic qualities pertaining to quantification, time-orientation and tone. Further, it serves as an exploratory study about risk disclosure practices in the Indian context that reveals notable differences from findings of previous risk disclosure research. Moreover, the study examines the relationship between firms’ age and risk disclosure levels, a largely ignored aspect in disclosure research.

Evidence on whether firms with higher risk choose a more transparent or more opaque risk reporting strategy in their annual reports is mixed. A potential explanation is that firms choose an alternative reporting strategy to risk disclosure, namely income smoothing. The purpose of this paper is to investigate the association between both strategies in relation to firm risk levels.

The authors use a balanced sample of 74 non-financial UK firms from the FTSE100 index over the period 2005–2015, examining the association between firm risk measures and both risk disclosure and income smoothing using a seemingly unrelated regression methodology.

The authors find that firm financial risk measures are positively associated with both risk disclosure and income smoothing, implying a complementary association. Furthermore, non-risk-related factors are associated with both lower levels of risk disclosure and higher income smoothing, implying a substitutive effect.

The authors do not consider other factors such as managerial optimism, managerial financial incentives and analysts' earnings forecasts which might influence the association between risk disclosure and income smoothing, and hence, this may be a limitation of the current study.

These results are important to regulators, investors and boards of directors who are interested in understanding the alternative reporting strategies that managers select when faced with high risk. The findings signal a need for closer regulatory scrutiny on not only the level of risk disclosure but also the financial reporting choices.

The authors extend the literature on the reporting versus recognition decisions made by managers.

This study aims to investigate the readability of financial risk disclosure divulged by listed banks of the first five European countries according to gross domestic product.

This study adopts the management obfuscation hypotheses and tests data gathered for a sample of 790 observations from listed banks in Europe covering the 2007–2018 period. This study uses a readability index (Gunning’s fog index) as the dependent variable for measuring the readability of banks’ mandatory financial risk disclosures. Moreover, it relies on a completeness index, discretionary accruals and several control variables for identifying the determinants of risk disclosure readability using ordinary least square regression for testing the hypotheses.

The findings show the existence of a positive relation\nship between readability and completeness of risk disclosure. In contrast, a negative relationship exists between readability and banks’ discretionary accruals.

This study expands the stream of accounting literature analyzing the lexical characteristics of narrative risk disclosure, and, by focusing on the financial risk disclosure of banks, it extends the readability-related debate, which has primarily concentrated on other types of disclosure to date. This study is relevant to regulators and policymakers for fostering reflections as actions for improving the financial risk disclosures readability. This study is also of potential interest for investors to better delve into the questions surrounding risk disclosure.