Market risk disclosures of banks: a cross‐country study

We hypothesize that firms' 10-K market risk disclosures, recently mandated by SEC Financial Reporting Release No. 48 (FRR No. 48), reduce investors' uncertainty and diversity of opinion about the implications, for firm value, of changes in interest rates, foreign currency exchange rates, and commodity prices. We argue that this reduced uncertainty and diversity of opinion should dampen trading volume sensitivity to changes in these underlying market rates or prices. Consistent with this hypothesis, we find that after firms disclose FRR No. 48-mandated information about their exposures to interest rates, foreign currency exchange rates, and energy prices, trading volume sensitivity to changes in these underlying market rates and prices declines, even after controlling for other factors associated with trading volume. The observed declines in trading volume sensitivity are consistent with FRR No. 48 market risk disclosures providing useful information to investors.

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Market Risk Disclosures and Investment Efficiency: International Evidence from the Gulf Cooperation Council Financial Firms

Journal of International Financial Management and Accounting ◽

10.1111/jifm.12063 ◽

2016 ◽

Vol 28 (3) ◽

pp. 349-393 ◽

Cited By ~ 8

Author(s):

Ahmed Al-Hadi ◽

Mostafa Monzur Hasan ◽

Grantley Taylor ◽

Mahmud Hossain ◽

Grant Richardson

Keyword(s):

Gulf Cooperation Council ◽

Market Risk ◽

Investment Efficiency ◽

Financial Firms ◽

International Evidence ◽

Market Risk Disclosures ◽

Risk Disclosures

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Effect of SEC Financial Reporting Release No. 48 on Derivative and Market Risk Disclosures

Accounting Horizons ◽

10.2308/acch.1999.13.4.343 ◽

1999 ◽

Vol 13 (4) ◽

pp. 343-363 ◽

Cited By ~ 71

Author(s):

Darren T. Roulstone

Keyword(s):

Financial Reporting ◽

Market Risk ◽

Risk Measurement ◽

Measurement Models ◽

Market Risk Disclosures ◽

Risk Disclosures

This study compares the disclosures about derivatives and market risk made by 25 SEC registrants in the years before (1996) and after (1997) the adoption of Financial Reporting Release No. 48 (SEC 1997) (FRR No. 48). FRR No. 48 requires firms to disclose how they account for derivatives and provide quantitative and qualitative disclosures about exposure to market risk. Market risk disclosures, encouraged but not required under FAS No. 119, improved greatly under FRR No. 48 but varied widely in detail and clarity. The majority of registrants provided quantitative and qualitative disclosures of market risk; however, only about half of these firms discussed the details and limitations of their risk measurement models and disclosures. Further, certain required or strongly recommended contextual disclosures were almost completely absent. Firms appear to prefer relatively complicated but more discreet disclosure formats to simpler but more revealing disclosure formats. Overall, while registrants greatly increased their disclosures about market risk, the disclosures leave room for improvement in future filings. These findings have significance for disclosure choice in general and the adoption of FAS No. 133 in particular.

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