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The joint effect of corporate risk disclosure and corporate governance on firm value

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Abstract

We investigate the joint effect of corporate risk disclosure (CRD) and corporate governance (CG) on firm value in Tunisia. We examine a sample of 156 firm observations of Tunisian-listed companies during 2008–2013. A manual content analysis method is used to measure the level of risk disclosure. We find that CRD has a negative and significant effect on firm value. In addition, family ownership negatively affects firm value. However, board size, the independence of the audit committee, and the presence of the women on the board lead to greater firm value. We find a substitution effect between CRD and CG mechanisms on the firm value. This paper adds to risk disclosure studies by examining the economic consequences of CRD in emerging market. Furthermore, this paper contributes to the literature by being the first study, to the best of our knowledge, which investigates the joint effect of CRD and CG mechanisms on firm value.

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Authors and Affiliations

  1. LIGUE, IHEC Carthage, University of Carthage, Carthage, Tunisia

    Issal Haj-Salem & Salma Damak Ayadi

  2. University of Portsmouth, Portsmouth, UK

    Khaled Hussainey

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  1. Issal Haj-Salem
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Appendix: Risk disclosure level Index

Appendix: Risk disclosure level Index

Adopted from Linsley and Shrives (2006) and Moumen et al. (2015), with some modifications according to the Tunisian context.

Operations Risk

 

Customer Satisfaction

 

Product Development

 

Efficiency and Performance

 

Sourcing

 

Stock Obsolescence and Shrinkage

 

Product and Service Failure

 

Environmental

 

Health and Safety

 

Brand Name Erosion

 

Out of stock*

 

Quality of products*

 

Suppliers*

 

Employees*

 

Empowerment Risk

 

Leadership and Management

 

Outsourcing

 

Performance Incentives

 

Change Readiness

 

Communications

 

Control*

 

Information Processing and Technology Risk

 

Integrity

 

Access

 

Availability

 

Infrastructure

 

Integrity Risk

 

Management and Employee Fraud

 

Ilegal Acts

 

Reputation

 

Litigation risk*

 

Strategic Risk

 

Environmental Scan

 

Industry

 

Business Portfolio

 

Competitors

 

Pricing

 

Valuation

 

Planning

 

Life Cycle

 

Performance Measurement

 

Regulatory

 

Sovereign and Political

 

Financial risk

 

Interest rate

 

Exchange rate

 

Commodity

 

Liquidity

 

Credit

 

Solvency ratio*

 

Profitability ratio*

 

Management ratio*

 

Working Capital Fun*

 

Downside risk*

 
  1. *Items added after reading annual reports

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Haj-Salem, I., Damak Ayadi, S. & Hussainey, K. The joint effect of corporate risk disclosure and corporate governance on firm value. Int J Discl Gov 17, 123–140 (2020). https://doi.org/10.1057/s41310-020-00079-w

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