Are Risk Management Disclosures Informative or Tautological? Evidence from the U.S. banking sector

Jizi, M.I.; Dixon, R.

Abstract

Banks experienced increasing risk levels during the latest financial crisis. Investors’ confidence was shaken by the effectiveness of bank risk management practices, which has opened new challenges for bank management in approaching its risk. Understanding and communicating adopted risk management mechanisms is likely to provide insights and enable diagnosis on firm risk exposure. Conveying data that reduces information asymmetry might be reflected on stock performance. Investigating the impact of risk management disclosures content on stock price change and return volatility, using a sample of U.S. national commercial banks during 2009–2010, shows that informative risk management disclosures seems to be valued by investors. This is reflected on current-year stock prices and reduces the subsequent-year return variances.

Citation

Jizi, M., & Dixon, R. (2016). Are Risk Management Disclosures Informative or Tautological? Evidence from the U.S. banking sector. Accounting Perspectives, 16(1), 7-30. https://doi.org/10.1111/1911-3838.12134

• Journal Article Type: Article
• Acceptance Date: Mar 16, 2016
• Online Publication Date: Mar 7, 2017
• Publication Date: Apr 1, 2016
• Deposit Date: Apr 12, 2016
• Publicly Available Date: Mar 7, 2019
• Journal: Accounting Perspectives
• Print ISSN: 1911-382X
• Electronic ISSN: 1911-3838
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 16
• Issue: 1
• Pages: 7-30
• DOI: https://doi.org/10.1111/1911-3838.12134
• Public URL: https://durham-repository.worktribe.com/output/1414708