Loading...
Corporate Governance, risk disclosure practices, and market liquidity: Comparative evidence from UK and Italy.
Elshandidy, Tamer Lorenzo, N.
Elshandidy, Tamer
Lorenzo, N.
Publication Date
01/07/2015
End of Embargo
Supervisor
Rights
Peer-Reviewed
Yes
Open Access status
closed Access
Accepted for publication
31/10/2014
Institution
Department
Awarded
Embargo end date
Collections
Additional title
Abstract
Manuscript Type: Empirical
Research Question/Issue: This paper examines the influence of corporate governance on risk disclosure practices in the UK and Italy and also studies the impact of those practices on market liquidity.
Research Findings/Insights: We find that governance factors principally influence the decisions of UK (Italian) firms over whether to exhibit risk information voluntarily (mandatorily) in their annual report narratives. When we distinguish between firms with strong and weak governance (in terms of board efficiency) in each country, we find that the factors that affect mandatory and voluntary risk disclosure appear to be driven more by strongly governed firms in both countries. Furthermore, strongly governed firms in the UK tend to provide more meaningful risk information to their investors than weakly governed firms. In Italy, however, we find that strongly rather than weakly governed firms exhibiting risk information voluntarily rather than mandatorily improves market liquidity significantly.
Theoretical/Academic Implications: This paper emphasizes the importance of distinguishing between mandatory and voluntary risk disclosure when studying the impact of corporate governance. Our findings differ across strongly and weakly governed firms, in terms of both the factors that influence risk disclosure practices and the exact informativeness of those practices.
Practitioner/Policy Implications: The results support the current regulatory trend in risk reporting within the UK that emphasizes the importance of directors and encourages rather than mandates risk disclosure. However, the results generally signal a need for further improvements in the Italian context. Our evidence also supports the value of the confidence in the UK governance system, compared to that in Italy, which motivates British firms to provide highly informative risk information more often than Italian firms.
Version
No full-text in the repository
Citation
Elshandidy T and Lorenzo N (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.
Link to publisher’s version
Link to published version
Link to Version of Record
Type
Article