<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The International Accounting Standard Board (IASB) aimed to increase the decision usefulness of firms’ risk disclosures with the 2007 introduction of the International Financial Reporting Standards (IFRS) 7. Specifically, listed firms were mandated to provide information to the market on both their (1) exposure and (2) risk management, which are associated with holding their financial instruments. This study investigates whether IFRS 7 financial instruments and their disclosures are associated with firm valuation. Using data on premiumlisted United Kingdom (UK) companies, for the period 2007–2019, I find evidence that firm value (proxied by Tobin's Q) is negatively associated with the quantity of IFRS 7 interest and credit risk disclosures. I further find that the market value decreases with the presence of quantitative information tabulated in the disclosures. The findings of this study have important implications for the IASB's standard-setting process.</p>
</abstract>

The International Accounting Standard Board (IASB) aimed to increase the decision usefulness of firms’ risk disclosures with the 2007 introduction of the International Financial Reporting Standards (IFRS) 7. Specifically, listed firms were mandated to provide information to the market on both their (1) exposure and (2) risk management, which are associated with holding their financial instruments. This study investigates whether IFRS 7 financial instruments and their disclosures are associated with firm valuation. Using data on premiumlisted United Kingdom (UK) companies, for the period 2007–2019, I find evidence that firm value (proxied by Tobin's Q) is negatively associated with the quantity of IFRS 7 interest and credit risk disclosures. I further find that the market value decreases with the presence of quantitative information tabulated in the disclosures. The findings of this study have important implications for the IASB's standard-setting process.

Risk Disclosure and Firm Value: Evidence from the United Kingdom

Central European Economic Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"Risk Disclosure and Firm Value: Evidence from the United Kingdom"}

The International Accounting Standard Board (IASB) aimed to increase the decision usefulness of firms’ risk disclosures with the 2007 introduction of the...

Risk Disclosure and Firm Value: Evidence from the United Kingdom

Publié en ligne: 29 janv. 2021

Pages: 15 - 24

DOI: https://doi.org/10.2478/ceej-2021-0002

Mots clés
market valuation, risk disclosures, IFRS 7, downside risk

© 2021 Tache Marta, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Risk Disclosure and Firm Value: Evidence from the United Kingdom

Publié en ligne: 29 janv. 2021

Pages: 15 - 24

DOI: https://doi.org/10.2478/ceej-2021-0002

Mots clésmarket valuation, risk disclosures, IFRS 7, downside risk

© 2021 Tache Marta, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Mots clés
market valuation, risk disclosures, IFRS 7, downside risk