Ownership Structure and Corporate Risk Disclosure in Emerging Countries

Abstract

The study examines the impact of ownership structure on corporate risk disclosure in African emerging countries. The sample includes 42 firms that are listed on the Johannesburg Stock Exchange and the Nigerian Stock Exchange. The data for the independent variables were taken from the Bloomberg data stream, whereas the data for the dependent variable were taken from annual reports retrieved from the website of the sample companies. The study’s time period runs from 2014 to 2018. Regression and content analysis were employed as the analytical tools. We perform text analysis on company annual reports to ascertain the risks that companies disclose, and regression analysis was used to establish the extent to which ownership structure influenced corporate risk disclosure. The result shows that strategic and environmental risk disclosures are dominated by operational risk disclosure. It has become a convention for the firms to divulge considerable positive, past, non-monetary information rather than negative, future and monetary risk information. Moreover, it is discovered that the decision to improve risk disclosure is largely influenced by company size and profitability. In contrast, firms are reluctant to unveil risk information provided the shares of the company are not concentrated in the hands of few individuals. Nonetheless, company risk disclosure practice is unaffected by institutional investors, government, foreigners, insider ownership and leverage. It can be concluded that the enterprises operating in emerging African markets have made improvements to
their risk disclosure practices. However, there is still room for further improvement. Monetary, future, and negative risk information are the most important risk disclosures that various stakeholder groups, such as investors, demand to see. Hence, there is a need for regulation that can compel corporations to publish the most pertinent risk information. Even though risk disclosure is voluntary in these two African emerging countries, ownership structure is one of significant predictors of corporate risk disclosure.