Risk Disclosure, Corporate Governance and Firm Value in an Emerging Country

Abstract

This study aims to examine whether risk disclosure practices and corporate governance mechanisms are associated with the performance of listed companies in Malaysia’s emerging economy. The study uses fixed effects panel data regression models to gauge the relationship using 899 firm-year observations from companies that provide risk disclosures in their annual reports. The findings show that risk disclosure has a significant effect on firm performance. Audit committee monitoring also has a significant relationship with firm performance, while the results regarding the existence of a risk management committee are insignificant. In additional analyses, a composite measure of audit committee effectiveness confirms that its monitoring role improves firm performance significantly. This study addresses risk disclosure practices in an under-researched setting (Malaysia) with different corporate governance models and emerging risk reporting legislation, thus adding to the limited body of knowledge on corporate risk disclosure and corporate monitoring and their impact on firm performance.