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Are bank risk disclosures informative? Evidence from debt markets

Ahmed A. Elamer, Collins G. Ntim, Hussein A. Abdou, Andrews Owusu, Mohamed Elmagrhi Orcid Logo, Awad Elsayed Awad Ibrahim

International Journal of Finance & Economics, Volume: 26, Issue: 1, Pages: 1270 - 1298

Swansea University Author: Mohamed Elmagrhi Orcid Logo

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DOI (Published version): 10.1002/ijfe.1849

Abstract

This study examines whether financial reporting with a specific focus on risk disclosures have a predictive (informative) effect on banks’ credit ratings (BCRs) and, consequently, ascertains whether governance structures can moderate such an association. Using one of the largest bank-level datasets...

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Published in: International Journal of Finance & Economics
ISSN: 1076-9307 1099-1158
Published: Wiley 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa54515
first_indexed 2020-06-19T03:09:39Z
last_indexed 2021-03-17T04:17:47Z
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spelling 2021-03-16T16:27:15.7967721 v2 54515 2020-06-18 Are bank risk disclosures informative? Evidence from debt markets 4def956b7e2d996ad0bfbfcb710b7ef6 0000-0003-3803-8496 Mohamed Elmagrhi Mohamed Elmagrhi true false 2020-06-18 CBAE This study examines whether financial reporting with a specific focus on risk disclosures have a predictive (informative) effect on banks’ credit ratings (BCRs) and, consequently, ascertains whether governance structures can moderate such an association. Using one of the largest bank-level datasets collected from 12 Middle East and North African (MENA) countries over the 2006-2013 period to-date, our findings are as follows. First, we find that risk disclosures have a predictive effect on BCRs. Second, we find that the relationship between risk disclosures and BCRs is contingent on the quality of governance structures. Specifically, we find that the informativeness of risk disclosures on BCRs is higher in banks with larger board size, greater independence, higher government ownership, and better Shariah supervisory board, but lower in banks with greater block ownership, higher foreign ownership and the presence of CEO duality. The central tenor of our findings remains unchanged after controlling for a number of firm- and country-level factors, alternative risk disclosure measures, firm- and national-level governance proxies, different types of banks, and potential endogeneities. The findings have important implications for investors, especially bondholders, standard-setters, regulators, and central governments. Journal Article International Journal of Finance & Economics 26 1 1270 1298 Wiley 1076-9307 1099-1158 Financial reporting, risk disclosures; Banks’ credit ratings; Debt markets; Governance structures; MENA 1 1 2021 2021-01-01 10.1002/ijfe.1849 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2021-03-16T16:27:15.7967721 2020-06-18T21:29:58.7458928 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Ahmed A. Elamer 1 Collins G. Ntim 2 Hussein A. Abdou 3 Andrews Owusu 4 Mohamed Elmagrhi 0000-0003-3803-8496 5 Awad Elsayed Awad Ibrahim 6 54515__17946__6e1abdb38f5a4d9b9ef6cb16945aaae8.pdf 54515.pdf 2020-08-17T10:37:31.7758093 Output 1911176 application/pdf Version of Record true Released under the terms of a Creative Commons Attribution-NonCommercial License (CC-BY-NC). true eng http://creativecommons.org/licenses/by-nc/4.0/
title Are bank risk disclosures informative? Evidence from debt markets
spellingShingle Are bank risk disclosures informative? Evidence from debt markets
Mohamed Elmagrhi
title_short Are bank risk disclosures informative? Evidence from debt markets
title_full Are bank risk disclosures informative? Evidence from debt markets
title_fullStr Are bank risk disclosures informative? Evidence from debt markets
title_full_unstemmed Are bank risk disclosures informative? Evidence from debt markets
title_sort Are bank risk disclosures informative? Evidence from debt markets
author_id_str_mv 4def956b7e2d996ad0bfbfcb710b7ef6
author_id_fullname_str_mv 4def956b7e2d996ad0bfbfcb710b7ef6_***_Mohamed Elmagrhi
author Mohamed Elmagrhi
author2 Ahmed A. Elamer
Collins G. Ntim
Hussein A. Abdou
Andrews Owusu
Mohamed Elmagrhi
Awad Elsayed Awad Ibrahim
format Journal article
container_title International Journal of Finance & Economics
container_volume 26
container_issue 1
container_start_page 1270
publishDate 2021
institution Swansea University
issn 1076-9307
1099-1158
doi_str_mv 10.1002/ijfe.1849
publisher Wiley
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
active_str 0
description This study examines whether financial reporting with a specific focus on risk disclosures have a predictive (informative) effect on banks’ credit ratings (BCRs) and, consequently, ascertains whether governance structures can moderate such an association. Using one of the largest bank-level datasets collected from 12 Middle East and North African (MENA) countries over the 2006-2013 period to-date, our findings are as follows. First, we find that risk disclosures have a predictive effect on BCRs. Second, we find that the relationship between risk disclosures and BCRs is contingent on the quality of governance structures. Specifically, we find that the informativeness of risk disclosures on BCRs is higher in banks with larger board size, greater independence, higher government ownership, and better Shariah supervisory board, but lower in banks with greater block ownership, higher foreign ownership and the presence of CEO duality. The central tenor of our findings remains unchanged after controlling for a number of firm- and country-level factors, alternative risk disclosure measures, firm- and national-level governance proxies, different types of banks, and potential endogeneities. The findings have important implications for investors, especially bondholders, standard-setters, regulators, and central governments.
published_date 2021-01-01T19:54:48Z
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score 11.04748

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