Examining the relationship between board characteristics and financial risk disclosure: A longitudinal analysis based on agency theory

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

The aim of this research is to enhance existing literature pertaining to corporate disclosure through an investigation of financial risk information that has been reported in annual reports. The study also seeks to determine the extent of disclosure and how it has changed over time. Furthermore, it examines the effects of board busyness, size, independence, and meetings on financial risk disclosure. The content analysis method was used to evaluate the annual reports of 4 energy companies over a 13-year period, resulting in 52 firm-year observations. The study used secondary data sources and focused on companies that were listed between 2009 and 2021. The findings indicate that board size has a positive impact on financial risk disclosure, whereas board independence has a negative impact. However, no significant effects were found for board busyness and board meetings. These results were robust across various estimation techniques. However, the study is limited in that it only considered certain board characteristics, and future research should explore the effects of other board characteristics and incorporate additional committee characteristics.

Keywords: Financial Risk Disclosure, Board Busyness, Board Size, Board Independence, Board Meetings, Saudi Arabia

Authors’ individual contribution: Conceptualization — S.A.A.A.-D. and K.O.A.; Methodology — S.A.A.A.-D.; Formal Analysis — S.A.A.A.-D.; Investigation — S.A.A.A.-D.; Resources — S.A.A.A.-D. and K.O.A.; Writing — Original Draft — S.A.A.A.-D.; Writing — Review & Editing — S.A.A.A.-D. and K.O.A.; Project Administration — K.O.A.; Funding Acquisition — K.O.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, G34, M41, O13, O16, Q56

Received: 05.06.2023
Accepted: 19.10.2023
Published online: 23.10.2023

How to cite this paper: Al-Dubai, S. A. A., & Alotaibi, K. O. (2023). Examining the relationship between board characteristics and financial risk disclosure: A longitudinal analysis based on agency theory. Corporate Governance and Organizational Behavior Review, 7(4), 137–151. https://doi.org/10.22495/cgobrv7i4p12