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Risk Disclosure Practices of Malawian Commercial Banks

Journal: Journal of Contemporary Issues in Business Research (Vol.3, No. 3)

Publication Date:

Authors : ;

Page : 154-167

Keywords : Annual reports; Risk disclosures; Risk disclosure Index; Malawi.;

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The aim of the study was to examine the risk disclosure level in annual reports of the Malawian commercial banks and the influence of profitability on it. The study used a risk disclosure index constructed based on the requirements of the Basel II framework, the corporate governance guidelines for banks issued by the Reserve Bank of Malawi and IFRS 7. The disclosure index consisted of 34 disclosure items divided into six categories namely: board and management structure related to risk management, market risk, credit risk, liquidity risk, capital management and operational and other risks. The results revealed a high risk disclosure level among the sampled banks. The individual bank score range was between 0.76 and 0.88 with an overall score of 0.82. Indicating that on average 82% of the disclosure items were actually disclosed in the annual reports of the sampled banks. Furthermore, the disclosure scores based on the risk disclosure categories varied between 0.61 and 1.00. The category with lowest score was board and management structure related to risk management (0.61) followed by operational risk and other risks (0.69). Capital management scored 0.74, whereas credit risk, liquidity risk and market risk each scored the maximum score of 1.00. Furthermore regression analysis suggested that profitability does not influence the level of risk disclosure.

Last modified: 2015-01-16 06:21:22