Financial Aspects, Corporate Governance and Disclosure of Financial Risk: Case of Indonesia

Abstract

Purpose: This study aims to determine the effect of profitability, liquidity, and good corporate governance (CGC) on financial risk disclosure. Disclosure of financial risk refers to IFRS 7 (International Financial Reporting Standard No.7).

Design/Methodology/Approach: The population used in this study includes all mining companies listed on the IDX, a total of 49 companies during the period 2017 to 2019. The samples used were 24 companies for 3 years of financial statements which were selected using the purposive sampling method, so that the data analyzed were 72. Data analysis used the regression method. The test results show that, partially, the profitability and audit committee size variables affect the disclosure of financial risk. Meanwhile, the liquidity variable and the size of the board of commissioners variable have no effect on financial risk disclosure.

Findings: The test results simultaneously show that profitability, liquidity, board size, and audit committee size have an effect on financial risk disclosure.

Practical Implications: The implication of this research for companies is that the results show that the average level of financial risk disclosure by companies is 0.299. According to the data obtained, the average company has fulfilled the required disclosures such as presenting information about risk exposure, how risks arise, objectives, policies, and risk management processes along with ways to measure them.

Originality/Value: This study comprehensively examines financial and non-financial factors, namely in terms of corporate governance that affect risk disclosure

Paper Type:  Research Paper