Abstract
This study makes significant contributions to the disclosure literature on multiple fronts. Firstly, it addresses a critical gap by investigating and comparing the determinants of risk disclosure in two distinct mediums: annual reports and Social Media Platform X.Secondly, the study introduces a novel python code to web scraping and measuring the number of sentences captured risk related content. This research updated the (Ibrahim,2017) comprehensive word list for Risk Disclosure (RD) and pioneers the measurement of risk disclosure levels using new keyword list that updated by considering social media disclosure.
Thirdly, it contributes by furnishing empirical evidence and assessing the economic usefulness of risk disclosure. This assessment involves an exploration of its impact on market firm value, proxied by Market-to-Book (MTB) and Tobin’s Q.
Fourthly, the study meticulously examines a sample of 350 UK non-financial firms listed on the FTSE-All Share Index. RD on both annual reports and social media reporting on X during 2010-2021 was measured, encompassing significant events such as Brexit and Covid-19.
The research employs five distinct regression tests, Ordinary Least Squares (OLS), Generalized Method of Moments (GMM), 2SLS, Random, and Fixed Regressions (FR) to confirm results and reduce the endogeneity impact. These tests are designed to scrutinize the influence of risk disclosure measured by two different scores: the first score gauges annual report-based risk disclosure, while the second measures social media-based risk disclosure.
The study holds noteworthy implications for the academic community, providing empirical evidence on the adverse impact of risk disclosure levels on subsequent firm value, as measured by both Market to Book value of equity (MTB) and Tobin’s Q. Additionally, the findings offer valuable practical insights for various stakeholders. The study also contributes to theoretical implications by establishing compatibility between its results and established risk disclosure theories. The results strongly advocate for managerial consideration of the risks disclosed to the public, recognizing its potential economic harm for the firm. Moreover, the study suggests that accounting standards regulators in the UK should formulate clear regulations to enhance the economic usefulness of social media-based risk disclosure, possibly contemplating the issuance of a standalone accounting standard for risk disclosure. Governance regulators are encouraged to emphasize the importance of risk disclosure and support further research to confirm that this practice does not negatively impact firm value. The key results confirm that the firms with larger boards, a higher board gender diversity, profitability, and leverage tend to disclose less risk information while big firms with a higher board age diversity, high education, and those with more Audit Committee (AC) experts tend to disclose more risk information. Firms with higher institutional, foreign, and state ownership tend to disclose more risk information. The results are persistent with turning to risk information on social media. Furthermore, this study adds to the growing debate on the influence of financial reporting quality in general and RD in particular on market firm value. Our findings confirm that firms with higher levels of RD are more likely to experience lower future market firm value. Our results suggest that RD in both annual reports and social media has a negative impact on market firm value. Additionally, the RD level in both mediums followed an upward trend.
| Date of Award | 29 Jul 2024 |
|---|---|
| Original language | English |
| Awarding Institution |
|
| Supervisor | Awad Ibrahim (Supervisor), Mohamed Bader-El-Den (Supervisor) & Shaling Li (Supervisor) |