Purpose – This thesis contributes to the research of voluntary credit risk disclosure
drivers for financial companies. Credit risk is one of the most important banking risks,
and information on credit risk is crucial for assessing a bank’s risk level. Nonetheless,
research on incentives for voluntary credit risk disclosure (VCRD) is underdeveloped.
The author adds to the body of knowledge by providing empirical evidence concerning
drivers for bank’s voluntary credit risk disclosure.
Design/methodology/approach – The thesis investigates a sample of 93 Western
European banks that are observed from 2015 to 2018. The extent of VCRD is measured
by a custom disclosure index that is based on frontrunning a mandatory disclosure
guideline. Hypotheses on VCRD are defined based on a multi-theoretical framework that
employs agency, signalling, legitimacy and stakeholder theories. The link between these
drivers and VCRD is empirically tested by using a hybrid panel data model.
Findings – Bank size, credit risk level, listing status, being considered significant by the
European Central Bank and board independence are positively associated with voluntary
credit risk disclosure. Legitimacy concerns, banking supervision monitoring and
management signalling play a material role to influence VCRD decisions.
Research limitations/implications – Generalisation of the findings might be impacted
based on the geographic focus of the study and its short period of observation. The index
creation is depending on the ability of the EBA guideline to capture relevant credit risk
disclosures. Bank scoring inevitably incorporates a degree of subjectivity.
Practical implications – The thesis provides insights for banking regulators and
supervisors on how banks can be incentivised to increase VCRD and suggests
improvements for future credit risk disclosure policies and regulations.
Originality/value – The thesis investigates a set of VCRD drivers that have previously
not been tested, innovatively employing a new disclosure index and a quantitative
framework based on a hybrid panel model.
Keywords: Voluntary credit risk disclosure, banks, Western Europe, disclosure index,
hybrid model, agency theory, signalling theory, legitimacy theory, stakeholder theor
