Risk management disclosures and banks financial performance: evidence from emerging markets

• Published in: Risk management (Leicestershire, England) Vol. 26; no. 1; p. 5
• Main Authors: Iqbal, Javid, Sohail, Muhammad Khalid, Irshad, Aymen, Khan, Rao Aamir
• Format: Journal Article
• Language: English
• Published: London Palgrave Macmillan UK 01-02-2024; Palgrave Macmillan
• Subjects: Annual reports; Asymmetric information; Banking; Banks; Disclosure; Economics and Finance; Emerging markets; Finance; Financial performance; Impact analysis; Original Article; Prevention programs; Risk assessment; Risk Management; Risk reduction; Banks; Performance prediction; Risk management disclosures; Negative sentiment
• ISSN: 1460-3799; 1743-4637
• DOI: 10.1057/s41283-023-00136-y

Risk management disclosures have attracted considerable attention after the financial crisis of 2007–2008. This study explores the relationship between risk management disclosures provided in annual reports and the bank’s current (future) performance. The sample consisted of 58 banks from several emerging markets covering the period of 2007 to 2020. The findings of the study provide strong evidence that managers' negative sentiment in risk-related disclosures in annual reports is closely linked with banks' future performance. In addition, the study highlighted the significance of risk management disclosures required by the Bank for International Settlement (BIS, Bank for International Settlements. Basel Committee on Banking Supervision, 2015.
http://www.bis.org/bcbs/publ/d309.pdf
) to reduce information asymmetry between the management and external stakeholders. Moreover, it provides regulators, auditors, and analysts with a new source of information that can help them identify banks at risk and take preventative measures to reduce the anticipated cost of failure to the government and its contagious impact on the country’s economy.