Journal Press India®

Risk Information Practices in Annual Reports: An Indo-German Collaborative Comparison

Vol 5, Issue 1, January - June 2018 | Pages: 1-17 | Research Paper  

 
Article has been added to the cart.View Cart (0)
https://doi.org/10.17492/mudra.v5i01.13032


Author Details ( * ) denotes Corresponding author

1. Thomas Berger, Professor, Co-operative State University Baden-Wurttemberg, Stuttgart, Germany (thomas.berger@dhbw-stuttgart.de)
2. * Pankaj Trivedi, Professor, K J Somaiya Institute of Management Studies & Research, Mumbai, Maharashtra, India (trivedi@somaiya.edu)
3. Sunil Parmar, Assistant Professor, K J Somaiya Institute of Management Studies & Research, Mumbai, Maharashtra, India (sunilparmar@somaiya.edu)

This paper looks at the information given on risks as disclosed in Indian and German annual reports. Such annual reports are a method for overcoming the information asymmetry between investors and managers by gaining information on the performance and the associated risks of listed companies. They can also be of valuable for analysts and managers as a reference for their own reporting and (financial) analysis. We therefore analysed the annual reports of the companies in the Indian SENSEX index and compared them with the companies included in the German DAX index keeping in mind the regulatory framework of their operations. This was done with the help of an evaluation scheme, acting as a guideline for the qualitative content analysis. With disclosure requirements oscillating between mandatory and voluntary, we found that while companies of both indices comply with the mandatory requirements, information on voluntary basis, especially on numerical concrete risk reporting, can be improved, more so in the Indian context. Also, some companies in both economies have shown the way in comprehensively categorizing risk related information which can be adopted, where possible, by other companies in their respective indices. Overall, we found that (1) companies issue only few information on concrete risks, (2) the difference in information quality between the two samples is statistically significant, and (3) size and leverage can explain part of the variance within the samples.

Keywords

Risk management; Risk reporting; SENSEX; DAX; Annual reports

  1. Accounting Standards Committee of Germany (ASCG) (2012). General accounting standard (GAS) No. 20: Group management report, (Berlin: Schaeffer-Poeschel).
  2. Ahmed, K. & Courtis, J. (1999). Associations between corporate characteristics and disclosure levels in annual reports: A meta-analysis. The British Accounting Review, 31(1), 35-61.
  3. Beattie, V., McInnes, B., & Fearnley, R. (2004). A methodology for analysing and evaluating narratives in annual reports: A comprehensive descriptive profile and metrics for disclosure quality attributes. Accounting Forum, 28(3), 205–236.
  4. Berger, T. & W. Gleißner. Risikosituation & Stand des Risikomanagement aus Sicht der Geschäftsberichterstattung. (2007). Ergebnisse einer empirischen Studie im Überblick. Zeitschrift für Corporate Governance, 2(2), 62-68.
  5. Berger, T. (2012). Risk reporting practices of Indian companies in the SENSEX. Asia-Pacific Journal of Risk and Insurance, 6(1), 1-14.
  6. Bradbury, M. (1992). Voluntary disclosure of financial segment data: New Zealand evidence. Accounting and Finance, 32(1), 15-26.
  7. Dobler, M. (2005). National and international developments in risk reporting: May the German Accounting standard 5 lead the way internationally? German Law Journal. 6(8), 1191-1200.
  8. Dobler, M.. Lajili, K. & Zéghal, D. (2011). Attributes of corporate risk disclosure: An international investigation in the manufacturing sector. Journal of International Accounting Research, 10(2), 1-22.
  9. Eisenschmidt, K., & Bilgenroth, F. Zur praktischen Umsetzung des Deutschen Corporate Governance Kodexes (2016). eine empirische Analyse der Unternehmen des HDAX und SDAX. Deutsches Steuerrecht (DStR), 54(10), 551–558.
  10. German Accounting Standards Board (GASB). (2010). German Accounting Standard No. 5 (Berlin: Schaeffer-Poeschel)
  11. Hossain, M. (2008). The extent of disclosure in annual reports of banking companies: The case of India. European Journal of Scientific Research, 23(4), 659–680.
  12. Hossain, M., Perera, M. & Rahman, A. (1995). Disclosure in annual reports of New Zealand companies. Journal of International Financial Management and Accounting, 6(1), 69-87.
  13. Kajüter, P. (2001). Risikoberichterstattung: Empirische Befunde und der Entwurf des DRS 5. Der Betrieb, 54(3), 105–111.
  14. Kajüter, P. & Esser, S. (2007). Risiko - und Chancenberichterstattung im Lagebericht. Zeitschrift für Internationale Rechnungslegung, 2(6), 381–390.
  15. Linsley, P. & Shrives, P. (2006). Risk reporting: A study of risk disclosures in the annual reports of UK companies. The British Accounting Review, 38(4), 387-404.
  16. Linsley, P., Shrives, P & Crumpton, M. (2006). Risk disclosure: An exploratory study of UK and Canadian banks. Journal of Banking Regulation, 7(3-4), 268-282.
  17. Madhani, P. (2014). Corporate governance and disclosure practices of Indian firms: An industry perspective. The IUP Journal of Corporate Governance, 13(2), 27–41.
  18. Meckling, W. & Jensen, M. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structures. Journal of Financial Economics, 3(4), 305-360.
  19. Rang, R. (2007). Qualität der Lageberichterstattung von Kapitalgesellschaften in Deutschland. Lageberichte der Geschäftsjahre 2004-2006 (Düsseldorf: Hans Böckler Stiftung).
  20. Ross, S. (1973). The economic theory of agency: the principal’s problem. American Economic Review, 63(2), 134-139.
  21. Rowbottom, N., & Lymer, A. (2010). Exploring the use and users of narrative reporting in the online annual report. Journal of Applied Accounting Research, 11(2), 90–108.
  22. Saggar, B. & Singh, B. (2017). Corporate governance and risk reporting: Indian evidence. Managerial Auditing Journal, 32(4-5), 378-405.
  23. Stanton, P., & Stanton, J. (2002). Corporate annual reports: Research perspectives used. Accounting, Auditing and Accountability Journal, 15(4), 478-500.
  24. Taruna, S., & Arpit, S. (2015). A study on corporate governance practices in India. International Journal of Applied Research, 1(9), 815–821.aaaa
Abstract Views: 277
PDF Views: 51

Advanced Search

News/Events

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

Department of Commer...

Department of Commerce, Faculty of Commerce & Business, University...

Birla Institute of M...

Birla Institute of Management Technology (BIMTECH) 3rd Pritam Singh M...

OP Jindal University...

OP Jindal University, India 4th International Conference on  ...

Department of MBA, N...

Department of MBA, Narayana Engineering College Nellore International...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management Conference Proceedings,...

Online Proceedings R...

Conference Proceedings, March 2023 ISBN: 978-81-956810-6-8 ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.