A1 Journal article – refereed

What Drives Quality of Firm Risk Disclosure?. The Impact of a National Disclosure Standard and Reporting Incentives under IFRS




List of Authors: Miihkinen Antti

Publication year: 2012

Journal: International Journal of Accounting

Journal name in source: International Journal of Accounting

Volume number: 47

Issue number: 4

ISSN: 0020-7063

DOI: http://dx.doi.org/10.1016/j.intacc.2012.10.005

URL: https://api.elsevier.com/content/abstract/scopus_id/84870243899


Abstract

This paper examines the impact of a detailed national disclosure
standard on the quality of firms’ overall risk reviews under IFRS. We
use data from a sample of listed Finnish firms around the introduction
of the standard and find that national regulatory bodies have been able
to raise the quality of risk disclosure on several dimensions even under
IFRS. We find increases in the quantity of risk disclosure with more
extensive and more comprehensive information. We do not, however, find a
corresponding increase in quantitative disclosures and therefore there
is some question regarding the influence of the standard on the
substance of the risk information provided. In addition to the coercive
effect of the standard, several important reporting incentives, such as
firm size, profitability, and foreign listing status are documented. We
also find some evidence that the impact of the standard on quality is
more pronounced among less profitable firms. Additional findings are
that larger firms and firms reporting under the requirements of the SEC
disclose more quantitative risk information, and that the quality
improvements are permanent in the subsequent years. The findings have
implications for standard-setters evaluating different strategies with
the aim to increase the quality of the narratives in annual reports.


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