FACTORS AFFECTING RISK DISCLOSURE: EVIDENCE FROM A DEVELOPING COUNTRY
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Risk disclosure has become an essential mechanism for enhancing transparency, reducing information asymmetry, and strengthening stakeholder confidence in the banking industry. Despite continuous regulatory efforts to improve disclosure practices, limited evidence exists regarding the determinants of risk disclosure in developing economies, particularly Bangladesh. Moreover, previous studies have largely overlooked environmental and social risk disclosures when evaluating overall risk reporting practices. This study investigates the factors affecting the level of risk disclosure among listed commercial banks in Bangladesh. The study employs a balanced panel dataset comprising 30 banks listed on the Dhaka Stock Exchange over the 2019–2021 period, resulting in 90 bank-year observations. A content analysis approach is used to construct a Risk Disclosure Index comprising 60 disclosure items, classified into nine categories: accounting policies; derivatives and hedging; financial instrument risk; operational risk; strategic risk; environmental and social risk; capital structure and adequacy; reserve risk; and compliance risk. Ordinary Least Squares (OLS) panel regression is employed to examine the influence of board composition, ownership structure, and firm-specific characteristics on risk disclosure. The descriptive results indicate that the average risk disclosure score is 74.87%, with a range of 46.67% to 93.33%. The regression model explains 33% of the variation in risk disclosure (R² = 0.33) and is statistically significant (F = 4.40, p < 0.001). The results reveal that board size (β = 0.0519, p < 0.10), board independence (β = 0.3211, p < 0.05), and firm size (β = 0.0708, p < 0.01) are positively associated with risk disclosure. In contrast, sponsor ownership (β = −0.0012, p < 0.10) and leverage (β = −0.0072, p < 0.01) exhibit significant negative associations. In contrast, female board representation, institutional ownership, foreign ownership, and profitability are not significantly associated with the extent of risk disclosure.
JEL Classification Codes: G21, M41, G32.
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