Non-financial risk disclosure practice: Evidence from Saudi Arabian listed companies

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Abstract

This study employs content analysis to analyse non-financial risk disclosure (NFRD) practices within the annual reports of Saudi listed companies over eight years (2010–2017). The data gathered shows that the levels of average NFRD are moderate. The descriptive results show that the average level of NFRD in the sample is 35.33%. This number is much lower than that reported in other studies elsewhere (Elamer et al., 2020; Konishi & Ali, 2007; Ntim et al., 2013). For example, Linsley and Shrives (2006) and Rajab and Handley-Schachler (2009) find that the mean of risk disclosure is 78 and 95 sentences for UK listed firms, respectively. Konishi and Ali (2007) report that Japanese companies offer 47 risk sentences on average. Thus, NFRD in Saudi Arabia appears to be smaller compared to other studies. The low level of NFRD in Saudi Arabia could be mainly clarified by the absence of enforcement. Throughout the study, there were no compulsory requirements for Saudi listed companies to offer information regarding risk or non-financial risk in their annual reports. The rise in the categories of risk-non-financial risk disclosures is more pronounced in the process risk where process risk disclosure grew from 27 (33%) in 2010 to 41 (50%) in 2017. Product, legal, and ethical risk disclosure appeared to be the most frequently disclosed risk, while the Shariah risk is significantly lower. The lack of Shariah risk disclosure can be explained by the fact that only two sectors substantially apply Shariah contracts such as Murabaha, Ijarah, and Istisnaa into their operations. The results of this study have the potential to support those preparing financial reports in firms, as well as regulators to enhance corporate NFRD practices and help investors and other key stakeholders.

Keywords: Non-Financial Risk Disclosure, NFRD, Non-Financial Risk Disclosure Index, Stakeholder Theory, Financial and Non-Financial Firms, Saudi Arabia

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: M41, M48

Received: 07.06.2023
Accepted: 06.10.2023
Published online: 10.10.2023

How to cite this paper: Alsulami, F. (2023). Non-financial risk disclosure practice: Evidence from Saudi Arabian listed companies. Corporate & Business Strategy Review, 4(4), 121–143. https://doi.org/10.22495/cbsrv4i4art12