Does quantity matter?: An investigation of the quantity of information in risk reports effect on the financial performance of EU banks
Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Banks within Europe have a major role in the European financial system. The financial collapse in 2008 made regulators well aware of the importance of corporate transparency to allow stakeholders to assess the banks health and maintain a stable market. Risk reporting within the European Union (EU) contributes to transparency in terms of disclosing information on risk management activities. The heavy regulations and demand from investors have caused the extent of risk reports to increase over time. The purpose of this research is to investigate if there is a relationship between the quantity of information in risk disclosures and the financial performance for banks in the EU and thus contribute with new knowledge to the field of finance, and increase managers' as well as stakeholders' understanding of the impact of risk reports. The methodological standpoints guide our choices throughout the research process. Our epistemological view is positivism and our ontological view is objectivism. A deductive research approach and a quantitative research method are adopted to collect archival data from risk reports and on financial performance from a sample of 41 banks. Our population consist of banks within the EU. The research design is cross-sectional using data from one point in time, the time period 2013-04-01 - 2014-03-31. Based on relevant theories and previous research, quantity proxies in terms of number of pages, words, characters and recurrence of keywords together with financial performance measures in terms of stock return, standard deviation and beta are used to investigate the relationship. 3 hypotheses are derived and tested by running regressions where the financial performance measures are the dependent variables and our proxies for quality are the independent variables. Our tests show that no significant relationship exists between the quantity of information in risk disclosures and the financial performance of banks within the EU. The results from our research contribute with new knowledge to academics within the field of finance by increasing the understanding of the explanatory variables for financial performance. Moreover, academics may use our results to justify the choice of other proxies than quantity when investigating quality in corporate disclosures. Additionally, our results indicate that practitioners should not use quantity of information in risk reports as an indicator of quality, as no relationship with the financial performance of a bank could be statistically proven.
Place, publisher, year, edition, pages
2014. , 105 p.
Financial performance, risk disclosure, quantity of information, regulatory requirements, voluntary disclosure
IdentifiersURN: urn:nbn:se:umu:diva-91347OAI: oai:DiVA.org:umu-91347DiVA: diva2:735829
International Business Program