The Effect of Risk Management Disclosure on Performance and Value: Investigating Switzerland's SMI-listed companies

Since the financial crisis of 2008, a higher emphasis has been placed on the topic of risk management. Governing bodies frequently ask listed companies to provide transparency in their risk management practices. By disclosing information through annual reports, companies seek to lend visibility to their risk management practices. This way, they foster their position as a reputable company, leading to advantages like an increase in shareholder value. This paper examines the effect of risk management disclosure (RMD) on firm performance (FP) and firm value (FV). Using a sample of listed firms in Switzerland, we examine the relationship between cross-sectional variation in RMD and FP / FV in the period after the financial crisis. Using a sample of non-financial companies listed in the Swiss Market Index (SMI), three multiple regressions are performed to predict the value of a firm, which was measured by the following metrics: Return on equity (ROE), Tobin’s Q (Tobin), and market-to-book ratio (MarkBook). Based on the regression analysis, we find that the quality of risk management disclosures is positively associated with the market-based measures of firm value (Tobin’s Q and MarkBook ratio). This result suggests that on average, the benefits of RMD exceed its costs. However, no effect on the accounting-based measure of firm performance (ROE) was found. Overall, the study highlights the fact that risks management information is important to investors in Switzerland when they make their investment decisions. The findings provide evidence that should be of particular interest for firms when deciding upon whether to provide or avoid disclosing risk management information to their stakeholders

ERM Report 2020: Die Rolle der Risk Manager in der COVID-19 Krise

Kein Abstract vorhanden+ ID der Publikation: hslu_81206 + Art des Beitrages: Studie oder Gutachten + Sprache: Deutsch + Letzte Aktualisierung: 2020-12-17 14:43:5