Informativeness Assessment of Risk and Risk-Management Disclosure in Corporate Reporting: An Empirical Analysis of Italian Large Listed Firms

Purpose Risk-related information is prevalently used in the decision-making process by a variuos counterparties. Therefore, this study investigates how companies conduct their risk-disclosure practice after the new Italian Legislative Decree No. 254 of December 30, 2016. In particular, we draw attention to three aspects: (1) the interaction relationship among risk or risk management (RRM), industry, type of risk, and level of specific disclosure; (2) the variation of specific level of disclosing risk-related information across the industries and types of risk; and (3) the different behavior between risk and risk-management disclosure in the aftermath of the regulation’s issuance. Design/methodology/approach The study is based on a sample of large undertakings and groups that are subject to the Legislative Decree. Two phases of content analysis were executed to analyze the risk and risk-management disclosure. The research questions were investigated with the row effects log-linear model. Findings Our result shows that there are interaction relationships among RRM, type of risk, industry, and level of specific disclosure. Companies provide risk-related information at different levels of specificity depending on whether the information is risk description or risk management, the firms are operating in manufacturing or nonmanufacturing, and the type of risk that the firms disclosed in their reports. Practical implications The paper provides evidence of inconsistent company behavior in disclosing company-specific information in favor of internal and external stakeholders, particularly by balancing company-specific disclosure between risk descriptions and risk-management policies. Policymakers might also consider this current phenomenon to decide to what extent disclosure requirements should be detailed and, instead, what room should be left for management discretion with respect to users’ needs. Originality/value This paper is an up-to-date assessment of Italian firms’ compliance with Legislative Decree No. 254 of December 30, 2016.