Do Risk Disclosures Relating to the Use of Financial Instruments Matter? Evidence from the Australian Metals and Mining Sector

Kevin Huu Phat Thai and Jacqueline Birt ()
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Kevin Huu Phat Thai: The University of Queensland, UQ Business School, St. Lucia, QLD 4072, Australia
Jacqueline Birt: The University of Western Australia, UWA Business School, Crawley, WA 6009, Australia

The International Journal of Accounting (TIJA), 2019, vol. 54, issue 04, 1-36

Abstract: This paper investigates the value relevance of risk disclosures relating to the use of financial instruments in the Australian metals and mining sector. The metals and mining sector is the largest sector in Australia by the number of companies and includes several of the world’s largest diversified resource producers. Using a manually constructed disclosure index based on AASB 7 Financial Instruments: Disclosures, we find that financial instrument-related risk disclosures provide useful information to equity investors. In terms of individual risk category, liquidity risk is shown to be the most informative risk disclosure. We contribute to a stream of the literature examining the informativeness of risk disclosures. The results of this study have implications for several stakeholders regarding the quality assessment of risk reporting. In addition, the findings are of interest to standard setters since further regulatory changes are under consideration to improve the presentation and disclosure of financial instruments.

Keywords: Financial instruments; metals and mining; disclosure index; AASB 7; risk disclosure (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S1094406019500173

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