The Effect of Risk Management Reporting on Financial Efficiency

Maryam Yousefinejad; Tahani Ali Hakami; Ahmed Abdulkareem Salloom Al-bazi; Jaizah Othman; Abdullah Alhadadi

Maryam Yousefinejad Faculty of Business, Management and Professional Studeis, Department of Accounting and Finance, Management and Science University, Malaysia
Tahani Ali Hakami Faculty of Business Administration, Accounting Department, Jazan University, Saudi Arabia
Ahmed Abdulkareem Salloom Al-bazi Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
Jaizah Othman Faculty of Business, Management and Professional Studeis, Department of Accounting and Finance, Management and Science University, Malaysia
Abdullah Alhadadi Faculty of Business Administration, Accounting Department, Jazan University, Saudi Arabia

Keywords: Financial Efficiency, Risk Management Reporting, Risk Management Committee, Liquidity Risk, Market Risk, Equity Price Risk.

Abstract

Purpose: The main objective of this study is to investigate the relationship between risk management reporting and financial efficiency.

Design/Methodology/Approach: Risk management reporting is measured by a score indicating whether companies report on risk management in their annual reports. Efficiency is measured by the total asset turnover, which is the ratio of net revenue on total assets. This study applied a panel research design and data are collected from 138 companies listed on Bursa Malaysia in the product and service industries from 2018 to 2020.

Findings: The result of this study shows that there is a significant relationship between risk management reporting and efficiency in Malaysia. The result of this study also shows between all available risk management reporting features in Malaysian companies' annual reports cyber risk, equity risk, inventory risk, market risk, and regulatory risk, have significant relationships with financial efficiency.

Practical Implications: The outcomes of this study may be useful for companies that have not prepared risk management reporting to understand the impact on their financial efficiency. The findings may also provide important suggestions for the boards of directors of these companies considering the preparation of such a report.

Originality/Value: The study contributes to the scientific literature by conducting an extensive analysis on the results of risk management reporting from the perspective of financial efficiency. The significant relationship between risk management reporting and efficiency provides evidence that risk management is an important determinant of financial efficiency and, ultimately, of improving company’s performance.

ABSTRACTING AND INDEXING