Determinants of Risk Disclosures an Evidence from Sri Lankan Manufacturing Companies

The need for companies to provide a higher level of disclosure has grown as a result of the business environment, operations, and regulatory requirements becoming more complicated. The main risks that listed manufacturing companies in Sri Lanka have disclosed are examined in this paper, along with the board characteristics that are associated with the disclosure of corporate risk information.

Sample of this study consist of randomly selected 30 listed manufacturing entities from the Colombo Stock Exchange for the period of five years (2013-2017). 150 firm-year observations were analyzed using panel regression techniques. Risk disclosure was measured by developing a 37- tem risk disclosure index based on Shrives & Linsley, (2006). The variables included in the study are board size, board independence, and role duality and ownership concentration.

According to the analysis of the risk disclosures, the level of risk disclosures in listed manufacturing firms in Sri Lanka tends to increase over time; total risk disclosure rose from 28.5% in 2013 to 32.3% in 2017. According to the research, there is also a significant correlation between board size, role duality, and ownership concentration and risk disclosure practices in Sri Lankan listed manufacturing companies.

This study's sample size is modest and consists solely of publicly traded manufacturing firms. Only published, audited annual reports were used in this research to gather data. In addition to board size, board independence, role diversity, and ownership concentration, and can suggest other corporate governance variables for consideration. The best study can be obtained by using secretarial reports of businesses.

This is the first study on risk disclosure practices of manufacturing sector companies in Sri Lanka. This study measures the level of risk disclosure variance over time and the impact of board characteristics on risk disclosure practices.