Pushing a balloon: does corporate risk disclosure matter for investment efficiency?

Mubashir Ali Khan, Josephine Tan Hwang Yau, Asri Marsidi and Zeeshan Ahmed

Journal of Financial Reporting and Accounting, 2022, vol. 21, issue 5, 1021-1048

Abstract: Purpose - This study aims to examine the effect of corporate risk disclosure on investment efficiency. This study also seeks to contribute to existing literature of corporate risk disclosure by investigating voluntary and mandatory risk disclosure and its effect on the investment efficiency. Design/methodology/approach - This study used two measures of corporate risk disclosure, level and quantity of corporate risk disclosure. A content analysis approach is adopted for non-financial Malaysian firms over the period 2010–2018. Findings - The empirical results show that level of corporate risk disclosure leads toward efficient investment, whereas quantity of corporate risk disclosure causes inefficient investment when firms disclose more voluntary risks. Further, categorizing corporate risk disclosure into mandatory and voluntary risk disclosure, this study finds that voluntary risk disclosure tends to have higher investment inefficiency, while no evidence was found for mandatory risk disclosure. Originality/value - This paper contributes to narrow stream of research investigating corporate risk disclosure through level and quantity contributing to the understanding of the level and quantity of risk disclosure in determining organizational investment efficiency.

Keywords: Corporate risk disclosure; Overinvestment; Underinvestment; Investment efficiency; Malaysian firms; content analysis (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-08-2021-0253

DOI: 10.1108/JFRA-08-2021-0253

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