University of Huddersfield Repository Corporate governance and risk reporting in South Africa: A study of corporate risk disclosures in the pre- and post-2007/2008 global financial crisis periods

The 2007/2008 global financial crisis has reignited the debate regarding the need for effective corporate governance (CG) through sound risk management and reporting practices. This paper, therefore, examines the crucial question of whether the quality of firm-level CG has any effect on the quality and extent of corporate risk disclosures (CRD) in South Africa (SA) with particular focus on the pre- and post-2007/2008 global financial crisis period. Using one of the largest datasets to-date on CG and CRD, from 2002 to 2011, and distinctively drawing on a multiple theoretical perspective, we find that CRD are largely ‘non-financial’, ‘historical’, ‘good news’ and ‘qualitative’ in nature over the ten-year period investigated. We also find that block ownership and institutional ownership are negatively associated with the extent of CRD, whilst board diversity, board size and independent non-executive directors are positively related to the extent of CRD. By contrast, dual board leadership structure has no significant connection with the extent of CRD. Our results are robust across a raft of econometric models that adequately address different types of endogeneity problems, as well as alternative CG and CRD proxies. Our findings are largely consistent with the predictions of our multi-theoretical framework that incorporates insights from agency, legitimacy, institutional, resource-dependence, and stakeholder theories. equality in means and medians of all our financial variables, including capital expenditure, firm size, leverage, operating profit and sales growth, between our final balanced sample of 50 firms and the unbalanced sample of 263 firms. If the two groups display similar features, then we can conclude that our final sample is representative of the underlying population. The results (which for brevity are not reported, but available upon request) indicate that there are no statistically significant differences in the mean or median values for all the variables. We interpret this observation as suggesting that the characteristics of our final 50 sampled firms are largely similar to the underlying population and that our findings are not likely to be seriously affected by survivorship bias.