Munich Business Research
Münchner Betriebswirtschaftliche Beiträge
How Informative is Risk Reporting?
– A Review of Disclosure Models –
写留学生论文Wolfgang Ballwieser, Chair for
Accounting and Auditing, Munich School of Management, Ludwig-Maximilians-UniversityMunich, Ludwigstr. 28/RG IV, D-80539 Munich, Germany.
How Informative is Risk Reporting?
– A Review of Disclosure Models –Michael Dobler
Abstract:
Risk reporting is an emerging reporting challenge in Europe. Current literature assumescorporate risk reporting to be informative for its users. The purpose of this paper is toinvestigate in how far risk disclosures can meet the information function alleged.
Embedded in frameworks of economics of information and of risk management, asubstantial review and discussion of discretionary disclosure models, including cheap
talk-models, provides a sound basis for assessing the information value provided by risk
reports. The results are manifold. First, the review highlights strong incentives for
discretion and manipulation by the manager who can use the report as a measure ofhandling derivative risks. These margins particularly stem from the uncertainty ofavailability and the non-verifiability of risk information. Second, the review exposesregulative implications to assist the information function of risk reporting. Thoseinclude the need for comparable reporting repelling a pure management approach, and
for supplemental information on corporate risk management. Third, the discussionqualifies common arguments concerning risk reporting. E.g., the ex post nominal/actualvalue comparison is inappropriate to assess credibility, the fear of self-fulfillingprophecies does not reason opt-out clauses. However, the alerting mainresult of thepaper is that, even in a regulated accounting environment, the information value of risk
reports must not be overestimated.
Keywords: Cheap Talk; Disclosure Models; Risk Management; Risk Reporting.
Acknowledgements: I am grateful to Wolfgang Ballwieser and Silvia Hettich for theirconstructive suggestions for improvement. I thank the participants of the 27th EAAConference held in April 2004 in Prague for helpful comments.
1 Introduction
In recent years, risk reporting has gained growing interest internationally. Prominentcorporate crises gave rise to call for risk reporting to give investors early warning ofpossibly negative developments. More generally, risk reports shall inform about the
effects risks (and chances) may have on the firm’s future financial position. Nationaland supranational regulators and standard-setters more and more oblige firm’s to reporton their risks. The new Basel II and Solvency II Accords highlight the risk disclosuresof banks and insurance. Although, these industries have been and still are forerunners,mandatory risk disclosures are by far not limited to financial service providers.IFRSs require information on going concern uncertainties and on key sources ofestimation uncertainty (IAS 1); on contingent assets and liabilities (IAS 37); and onrisks and risk management associated with financial instruments (IAS 32; ED 7). USGAAP
require similar information on contingencies (SFAS 5), financial instruments(SFAS 133), certain significant estimates, and risks caused by concentrations (SOP 94-6). The SEC obliges entities to disclose risk factors, trend information, and market riskexposure (Form 10-K; Form 20-F). Since 1998, the German legislationexpres
本论文由英语论文网提供整理,提供论文代写,英语论文代写,代写论文,代写英语论文,代写留学生论文,代写英文论文,留学生论文代写相关核心关键词搜索。