Do free-floated shares and board characteristics influence corporate risk disclosure? An empirical analysis on conventional banks in a developing country

Abstract

Purpose

This study aims to explore the status and drivers (including free-floated shares, board size, rule duality and board independence) of corporate risk disclosure (CRD) for the conventional listed banks in the Egyptian stock market from 2010 to 2021, which include the country’s major political upheavals and the COVID-19 pandemic.

Design/methodology/approach

This study based on a sample of 117 annual reports of sampled banks from 2010 to 2021. RD index of Al-Maghzom (2016) was developed and adopted to quantify CRD using an unweighted scoring system. The multiple linear regression model was used to validate the hypotheses.

Findings

The analysis shows that the COVID-19 pandemic increased insignificantly disclosure of all risks except for segment risks. In addition, findings reveal that all sampled banks adhere highly to the requirements of mandatory RD, with a low level of adherence to voluntary RD. Moreover, the analysis concluded that the board size and free-floating shares positively affect the disclosure of financial, operational, general information.

Research limitations/implications

The study’s limitations include the content analysis methodology, reliance on annual reports, emphasis on financial and non-financial risks, focus on listed conventional banks in Egypt.

Practical implications

Current study’s findings are more likely to be useful for many parties. It informs investors about the characteristics of the boards’ directors of Egyptian listed banks that disclosed risk information. Banks should disclose more comprehensive risk information. For academics, the current study’s limitations can be considered in their future research.

Originality/value

This work fills a new research area in which there is relatively little research in emerging financial markets that adds new evidence to the relationship between RD and both free-floating shares and board characteristics, particularly in Egypt.

Citation

Radwan, E.K.A., Ali, N.O.H. and Mohamed, M.K.A. (2023), "Do free-floated shares and board characteristics influence corporate risk disclosure? An empirical analysis on conventional banks in a developing country", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-11-2022-0436