Corporate Risk Disclosure: A Conventional and Islamic Bank Perspective

Focusing on the differences between conventional and Islamic banks, this paper examines the association between the extent of risk disclosure and banks’ risk governance, board structure and audit quality characteristics. Using 390 bank-year observations from 2006-2018, this paper uses content analysis to explore the extent of risk disclosure by conventional and Islamic banks. The results reveal that governance factors (e.g., risk committee, presence of a risk management unit, board independence, board size and Big4 auditor) are associated with the extent of risk disclosure more in conventional banks compared with their Islamic bank counterparts. The results support the notion that regulatory regimes for risk reporting within conventional banks emphasise risk governance characteristics and indicate a need for further improvement in an Islamic bank context. The results also support the notion that more strongly governed banks are likely to provide a higher level of risk disclosure and they provide a foundation for further research in this area. This paper adds to the limited existing literature on risk disclosure and is distinctive in examining risk governance characteristics in both conventional and Islamic banks within a developing country context where risk disclosure is effectively voluntary.