Nahar, Shamsun, Azim, Mohammad, and Jubb, Christine (2016) Risk disclosure, cost of capital and bank performance. International Journal of Accounting & Information Management, 24. pp. 476-494.

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Abstract

Purpose: This study aims to examine the relationship among corporate risk disclosure, cost of equity capital and performance within banking institutions in a developing country setting. The authors argue that corporate risk disclosure reduces the cost of capital as investors attain better information and have confidence in the business and that less risk disclosure may generate ambiguity for potential stakeholders.

Design/methodology/approach: This study uses the population of all 30 listed banks on the Dhaka Stock Exchange, Bangladesh, for the years 2006 to 2012 and uses three-stage least-squares simultaneous equations to deal with endogeneity issues.

Findings: There is evidence that Bangladesh has voluntarily adopted the International Financial Reporting Standard 7 – Financial Instruments: Disclosures (IFRS 7) and Basel II: Market Discipline and that these standards enhance risk disclosure even where compliance is not compulsory. The cost of capital is found to be negatively associated with risk disclosure, which has an inverse relationship with bank performance.

Originality/value: This study provides a link between risk disclosure, cost of capital and performance. It fills a gap in the literature by providing a longitudinal study of risk disclosure in the banking sector of Bangladesh. This research also highlights the importance of appropriate risk disclosure for banks and suggests its importance in the process of fulfilling stakeholders’ demands.

Item ID:	79771
Item Type:	Article (Research - C1)
ISSN:	1758-9037
Keywords:	Performance, Cost of capital, Bank, Risk disclosure
Copyright Information:	Copyright © 2016, Emerald Group Publishing Limited.
Date Deposited:	06 Sep 2023 06:41
FoR Codes:	35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3501 Accounting, auditing and accountability > 350199 Accounting, auditing and accountability not elsewhere classified @ 100%
SEO Codes:	11 COMMERCIAL SERVICES AND TOURISM > 1199 Other commercial services and tourism > 119999 Other commercial services and tourism not elsewhere classified @ 100%
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