Corporate governance reform and risk management disclosures: evidence from Nigeria

• Authors: Mahmud Kakanda Mohammed , Salim Basariah , Chandren Sitraselvi
• Languages of publication: EN

Abstracts

EN

The purpose of this study is to examine the disclosure intensity of risk management practices of listed financial service firms in Nigeria after the Corporate Governance (CG) reform in the year 2011. In the quest to achieve the objective of this study, content analysis of the annual reports of 45 sampled firms spanning from the year 2012 to 2015 was carried out. The study finds that there is a significant disclosure of risk management practices of the sampled firms, especially in relation to their risk management committee structure and its responsibility, risk management policies, audit committee availability and function, and capital/market risks. The sample firms remain reluctant in the disclosure of their environmental risk and operational risks. Moreover, there is no significant difference between banks and nonbanks in the disclosure of their risk management practices, signifying a strong adherence to the 2011 reformed CG code in Nigeria.

Keywords

EN

Corporate governance reform; risk management disclosure; risk management practices; financial service firms; Nigerian corporate governance code

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2017
• Volume: Volume 13
• Issue: Issue 3
• Pages: 357-367

Dates

published

2017-09-15

Contributors

author

Mahmud Kakanda Mohammed

• School of Management and Information Technology, Modibbo Adama University of Technology Yola, Nigeria

author

Salim Basariah

• Tunku Puteri Intan Safinaz-School of Accounting, Universiti Utara Malaysia Sintok, Malaysia

author

Chandren Sitraselvi

• Tunku Puteri Intan Safinaz-School of Accounting, Universiti Utara Malaysia Sintok, Malaysia

References

• Abraham, S., & Shrives, P. J. (2014). Improving the relevance of risk factor disclosure in corporate annual reports. The British accounting review, 46(1), 91-107. https://doi.org/10.1016/j.bar.2013.10.002
• Amran, A., Manaf Rosli Bin, A., & Che Haat Mohd Hassan, B. (2008). Risk reporting: An exploratory study on risk management disclosure in Malaysian annual reports. Managerial Auditing Journal, 24(1), 39-57. https://doi.org/10.1108/02686900910919893
• Badriyah, N., Sari, R. N., & Basri, Y. M. (2015). The Effect of Corporate Governance and Firm Characteristics on Firm Performance and Risk Management as an Intervening Variable. Procedia Economics and Finance, 31, 868-875. https://doi.org/10.1016/S2212-5671(15)01184-3
• Beretta, S., & Bozzolan, S. (2004). A framework for the analysis of firm risk communication. The International Journal of Accounting, 39(3), 265-288. https://doi.org/10.1016/j.intacc.2004.06.006
• Bethel, J. E. (2007). Recent changes in disclosure regulation: Description and evidence. Journal of Corporate Finance, 13(2), 335-342. https://doi.org/10.1016/j.jcorpfin.2007.03.005
• Buckby, S., Gallery, G., & Ma, J. (2015). An analysis of risk management disclosures: Australian evidence. Managerial Auditing Journal, 30(8/9), 812-869. https://doi.org/10.1108/MAJ-09-2013-0934
• Carlon, S., Loftus, J. A., & Miller, M. C. (2003). The challenge of risk reporting: regulatory and corporate responses. Australian Accounting Review, 13(31), 36-51. https://doi.org/10.1111/j.1835-2561.2001.tb00170.x
• Chatterjee, D., & Bose, S. K. (2007). Corporate governance, risk management and internal audit: A case study. Management and Labour Studies, 32(4), 515-521. https://doi.org/10.1177/0258042X0703200406
• Committee of Sponsoring Organizations of the Treadway Commission [COSO] (2009). 'Strengthening Enterprise Risk Management for Strategic Advantage', retrieved February 12, 2017 from https://www.coso.org.
• Dabari, I. J., & Saidin, S. Z. (2015). Determinants Influencing the implementation of enterprise risk management in the Nigerian banking sector. International Journal of Asian Social Science, 5(12), 740-754. https://doi.org/10.18488/journal.1/2015.5.12/1.12.740.754
• Deegan, C., Rankin, M., & Voght, P. (2000). Firm's disclosure reaction to major social incidents: Australian evidence. Accounting Forum, 24(1), 101-130. https://doi.org/10.1111/1467-6303.00031
• Elshandidy, T., & Neri, L. (2015). Corporate governance, risk disclosure practices, and market liquidity: comparative evidence from the UK and Italy. Corporate Governance: An International Review, 23(4), 331-356. https://doi.org/10.1111/corg.12095
• Elshandidy, T., Fraser, I., & Hussainey, K. (2013). Aggregated, voluntary and mandatory risk disclosure incentives: evidence from UK FTSE all-share companies. International Review of Financial Analysis, 30, 320-333. https://doi.org/10.1016/j.irfa.2013.07.010
• Hackston, D., & Milne, M. J. (1996). Some determinants of social and environmental disclosures in New Zealand companies. Accounting, Auditing & Accountability Journal, 9(1), 77-108.
• Holland, J. (1998). Private disclosure and financial reporting. Accounting Business Research, 28(4), 255-269. https://doi.org/10.1080/00014788.1998.9728914
• Hubbard, D. W. (2014), How to measure anything: Finding the value of intangibles in business. John Wiley & Sons.
• ICAEW (2011). Reporting business risks: Meeting expectations. London: Institute of Chartered Accountants of England and Wales (ISAEW).
• IFC (2010). Corporate governance manual (Second ed.). International Finance Corporation (IFC). BASCON, Hanoi, Vietnam.
• Ironkwe, U., & Adee, G. M. (2014). Corporate governance and financial performance in Nigeria. Journal of Exclusive Management Science, 3(8), 1-6.
• Kakanda, M. M., Salim, B., & Chandren, S. (2017). Corporate governance, risk management disclosure, and firm performance: A theoretical and empirical review perspective. Asian Economic and Financial Review, 7(9), 836-845. https://doi.org/10.18488/journal.aefr.2017.79.836.845
• Karatzias, V. (2011). The relationship between corporate governance and risk management during the credit crisis. The case of financial institutions. MIBES, 145-156.
• Lajili, K., & Zéghal, D. (2005). A content analysis of risk management disclosures in Canadian annual reports. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l'Administration, 22(2), 125-142. https://doi.org/10.1111/j.1936-4490.2005.tb00714.x
• Lang, M., & Lundholm, R. (1993). Cross-sectional determinants of analyst ratings of corporate disclosures. Journal of accounting research, 3(2), 246-271. https://doi.org/10.2307/2491273
• Linsley, P. M., & Shrives, P. J. (2005). Examining risk reporting in the UK public companies. The Journal of Risk Finance, 6(4), 292-305. https://doi.org/10.1108/15265940510613633
• Linsmeier, T. J., Thornton, D. B., Venkatachalam, M., & Welker, M. (2002). The effect of mandated market risk disclosures on trading volume sensitivity to interest rate, exchange rate, and commodity price movements. The Accounting Review, 77(2), 343-377. https://doi.org/10.2308/accr.2002.77.2.343
• Mmadu, R. A. (2013). Corporate governance and bank sector crisis in Nigeria: Rescue intervention or a Macabre dance with the economy? African Journal of Law and Criminology, 3(1), 83-109.
• Organization for Economic Co-operation and Development, OECD (2015). G20/OECD Principles of corporate governance, a report to G20 finance ministers and Central Bank governors, 4th-5th September, Ankara, Turkey.
• OECD (2014). Risk management and corporate governance. OECD Publishing. http://dx.doi.org/10.1787/9789264208636-en
• Said Mokhtar, E., & Mellett, H. (2013). Competition, corporate governance, ownership structure and risk reporting. Managerial Auditing Journal, 28(9), 838-865.
• Sanusi, L. S. (2010). The Nigerian Banking Industry: what went wrong and the way forward. Governor Central Bank of Nigeria (a lecture delivered at convocation of Bayero University, Kano). Retrieved January 23, 2017 from http://www.cenbank.org/
• Solomon, J. F., Solomon, A., Norton, S. D., & Joseph, N. L. (2000), A conceptual framework for corporate risk disclosure emerging from the agenda for corporate governance reform. The British Accounting Review, 32(4), 447-478.
• Stemler, S. (2001). An overview of content analysis. Practical assessment, research & evaluation, 7(17), 137-146.
• Wong, S. P. (2012). The impact of culture on risk management disclosures: an exploratory study of international banks. Southern Cross University, ePublications@SCU, Theses.