Risk reporting: An exploratory study on risk management disclosure in Malaysian annual reports

Purpose – The purpose of this paper is to explore the availability of risk disclosures in the annual reports of Malaysian companies by focusing on the non-financial section of the reports. In addition, the paper aims to empirically test the sampled companies' characteristics and to compare the levels of risk faced by these companies with the disclosures made. Design/methodology/approach – The method used in this study is content analysis. A total of 100 listed companies' annual reports were analyzed in order to trace the extent of risk disclosure and the relationship against firm characteristic and diversification strategy were tested. Stakeholder theory was used in explaining the linkages between the variables. Findings – The total number of sentences dedicated for discussion of risk information by the sampled Malaysian companies is very much less when compared to a 2006 study done by Lisley and Shrives in the UK. Size does matter and proven significant by the regression results. This finding is expected and explainable from stakeholder theory. Research limitations/implications – Future research is encouraged to look deeper into the different variables that may be involved. The development of a local risk measurement checklist will help researchers to better reflect on the findings in the local context. Practical implications – Findings in regards of the current state of risk disclosure should be of concern to relevant reg ulatory bodies. Originality/value – This paper provides an initial understanding of risk management disclosure practices in Malaysia. The government, through various relevant parties, should devise the means to enhance companies' involvement in risk management disclosure practices.