The risk reporting

: evidence from Portuguese Companies

Abstract

Financial Reporting and disclosure are potentially important measures for managers to disclose firm performance and governance to external investors. Nowadays, markets are globalized and that drives to an easier growth expansion by companies. However, this globalization meant an increase of competition and the creation of new laws by governments. On the other hand, external investors demand more information about firms. Due to the corporate failures that have occurred in the past, the confidence was broken between insiders and outsiders. Consequently, there is a need by companies to disclose more information in order to improve their image and to become more transparent. Moreover, the impacts may arise on the financial side by decreasing the cost of capital and monitoring costs. Therefore, the topic of Risk reporting and control has been receiving much attention and it is probably one of the main Risk topics that will be potentially discussed in the future. This study, examines the association between several independent variables and a single dependent variable. It was concluded that some of our independent variables namely the capital structure, the profitability and market capitalization are not associated with risks’ disclosure among the PSI-20 companies’ Index. Contrary to the previous results, we verified the Total Assets, Coverage ratio (measures the extension of risk communication), and a specific industry or event may have positive and significant relationship with the dependent variable of this study. On the second part of this study it was provided evidence about the managers’ perspectives regarding this Risk Reporting topic. Evidence is shown that managers want to allocate more resources in the future in the areas of Risk Reporting. However, it was concluded that the gap of information existent between external investors and managers will persist because those managers want to keep their level of voluntary risk disclosure. Although they have not attributed much importance to this important topic of information asymmetry (they could reduce the gap by sending information to markets), they want to help investors on their processes of investments’ decision making with the lowest possible information disclosed.

Date of Award	12 Feb 2015
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Cristina Neto de Carvalho (Supervisor)