An Empirical Analysis of Risk Disclosure and its Effects on Firms' Growth of Consumer Goods Companies in Nigeria

This study is an empirical analysis of risk disclosure and its effects on firm’s growth of consumer goods companies in Nigeria for the period between 2018-2024. The study used ex-post facto research design to collect data through the purposeful sampling techniques. The dynamic Generalized Moment Method was used to analyse the data. The findings of the study revealed that ORMD; LRMD; and SRMD have statistical significant effect on firm’s growth of consumer goods companies The study concludes that risk management disclosures have significant effect on firms’ performance among the quoted consumer goods firms in Nigeria. This is to say that Study having established a model fit on risk management disclosures (operational risk management disclosure, liquidity risk disclosure management, and solvency risk disclosure management.) concludes that risk management disclosures have a significant effect on firms’ performance among the quoted consumer goods firms in Nigeria. This is to say that risk management of firms drives the performance, and the study also established that firms with effective empowerment risk management make higher profits. Thus, the study recommends that firms should continue to improve their voluntary disclosure on empowerment risk management in their reporting based on leadership & management, outsourcing, performance incentive, change readiness and communication as these disclosures are essential for investors’ decision making.

Assets growth; Risk disclosure; Liquidity risk disclosure; Solvency risk disclosure

1. Adeyemi, S. B. (2006). Impact of Accounting Standards on Financial Reporting in Nigeria, Unpublished PhD. Thesis, University of Lagos. [Google Scholar] [Crossref]

2. Agubata, N. S., Igbru, O., & Udezo, N. O. (2021). Effect of corporate governance on financial risk disclosure of banks in Nigeria. International Journal of Innovative Social Sciences & Humanities Research 9(4):136-145. [Google Scholar] [Crossref]

3. Akenga, G. (2017). Effect of liquidity on financial performance of firms listed at the Nairobi securities exchange, Kenya. International Journal of Science and Research, 6(7), 1-7. [Google Scholar] [Crossref]

4. Alexandra, H., Stefania, C. C., Alexandra, S. P., Cosmin-Alin, B., Lucian, B. & Dan-Gabriel D. (2021). Solvency risk and corporate performance: A case study on European retailers. Journal of Risk and Financial Management, 14(5), 1-34. [Google Scholar] [Crossref]

5. Alkurdi, A., Hussainey, K., Tahat, Y., & Aladwan, M. (2019). The impact of corporate governance on risk disclosure: Jordanian evidence. Academy of Accounting and Financial Studies Journal, 23(1), 1-16. [Google Scholar] [Crossref]

6. Al-Dubai, S. A. A., & Abdelhalim, M. M. A. (2021). The relationship between risk disclosure and firm performance: Empirical evidence from Saudi Arabia. Journal of Asian Finance, Economics and Business, 8(6), 0255–0266. [Google Scholar] [Crossref]

7. Al-Mamari, S. H., Al-Ghassani, A. S., & Ahmed, E. R. (2022). Risk management practices and financial performance: The case of sultanate of Oman. Journal of accounting Science, 6(1), 69-83. [Google Scholar] [Crossref]

8. Anetoh, V. C., Nwadialor, E. O., Anetoh, J. C., & Okeke, G. N. (2021). Effect of credit and operational risk management on firm value of deposit money banks in Nigeria. African Journal of Accounting and Financial Research, 4(1), 14-32. [Google Scholar] [Crossref]

9. Baimukhamedova, A., Baimukhamedova, G., & Luchaninova, A. (2017). Financial disclosure and the cost of equity capital: The empirical test of the largest listed companies of Kazakhstan, Journal of Asian Finance, Economics and Business, 4(3), 5–17. https://doi.org/10.13106/jafeb.2017.vol4.no3.5 [Google Scholar] [Crossref]

10. Bishnu, P. (2019). Effect of credit risk on the financial performance of commercial banks in Nepal. European Journal of Accounting, Auditing and Finance Research, 7(5), 87-103. [Google Scholar] [Crossref]

11. Boateng, A. A. & Boateng, G. O. (2022). An appraisal of risk management practices of microfinance institutions in Ghana. IISTE Journal of Economics and Sustainable Development, 5(6), 14-21. [Google Scholar] [Crossref]

12. CBN. (2023). Revised regulatory and supervisory guidelines for microfinance banks in Nigeria. [Google Scholar] [Crossref]

13. Cendrowski, H. & Mair, W. C. (2019). Enterprise Risk Management and COSO. New Jersey, John Wiley & Sons. [Google Scholar] [Crossref]

14. Chukwunulu, J., Ezeabasili, N., & Igbodika, M. (2018). Risk management and the performance of commercial banks in Nigeria. IIARD International Journal of Banking and Finance Research, 5(1), 231-247. [Google Scholar] [Crossref]

15. Coskun, Y. (2021). Financial engineering and engineering of financial regulation: Guidance for compliance and risk management. Journal of Securities Operations & Custody, 6(1), 81-94. [Google Scholar] [Crossref]

16. COSO, (2004). Committee of sponsoring organizations of the tread way commission. Enterprise risk management–integrated framework: Executive summary. [Google Scholar] [Crossref]

17. Dey, R. K., Hossain, S. Z., & Razaee, Z. (2018). Financial risk disclosure and financial attributes among publicly traded manufacturing companies: Evidence from Bangladesh. Journal of Risk and Financial Management Article, 11(50), 1-16. [Google Scholar] [Crossref]

18. Diamond, W. & Rajan, G. (2001). Liquidity risk, liquidity creation, and financial fragility: a theory of banking, The Journal of Political Economy, 109(2), 1413-1425. [Google Scholar] [Crossref]

19. Egedegbe, M. (2020). Incentives for risk reporting: A discretionary disclosure and cheap talk approach. The International Journal of Accounting, 43(2), 184-206. [Google Scholar] [Crossref]

20. Gadzo, S. G., Kportorgbi, H. K., & Gatsi, J. G. (2019). Credit risk and operational risk on financial performance of universal banks in Ghana: A partial least squared structural equation model (PLS-SEM) approach. Cogent Economics and Finance, 7(1), 1-16. https://doi.org/10.1080/23322039.2019.1589406. [Google Scholar] [Crossref]

21. Ghasim, B., Osmani, L., & Abbasi, U. (2021). The relationship between the firm’s performance and the level of risk disclosure among the listed firms in Tehran Stock Exchange, Tourism Management, 42, 342-351. [Google Scholar] [Crossref]

22. Hassan, K. M. (2019). UAE corporations-specific characteristics and level of risk disclosure. Managerial Auditing Journal, 24: 668–87. [Google Scholar] [Crossref]

23. Iatridis, G. (2018). Accounting disclosure and firms' financial attributes: evidence from the UK stock market. International Review of Financial Analysis, 17(2), 219-241. [Google Scholar] [Crossref]

24. Jackson, P., Perraudin, W., & Saporta, V. (2002). Regulatory and economic solvency standards for internationally active Banks. Bank of England working papers, No. 161. [Google Scholar] [Crossref]

25. Kiflee, Ag. K. R., Azli, M. N., & Khan, A. (2019). Risk disclosure and corporate governance characteristics. European Proceedings of Social and Behavioural Science. 1-15.DOI: 10.15405/epsbs.2020.10.1 [Google Scholar] [Crossref]

26. Koontz, H & Bradspies, R. (2022). Managing through feed forward control. Business Horizons, 2(1), 25-36. [Google Scholar] [Crossref]

27. Lajili, R., & Zehgal, S. (2017). Corporate governance, risk management disclosure, and firm performance in Canada: a theoretical and empirical review perspective. Asian Economic and Financial Review, 7(9), 836-845. [Google Scholar] [Crossref]

28. Lang, S., & Lundholm, A. (2017). Corporate risk disclosure and its relationship to stock prices.in China, Journal of Accounting and Financial Management, 2, 55-63 [Google Scholar] [Crossref]

29. Linsley, P. M. & Shrives, P. J. (2006). Risk reporting: a study of risk disclosures in the annual reports of UK companies. The British Accounting Review, 38(4), 387-404. [Google Scholar] [Crossref]

30. Mokhtar, P., & Mellett, I. (2017). The extent of mandatory and voluntary risk management reporting and financial performance in annual reporting of Egyptian companies, Journal of Risk Management in Financial Institutions, 3(2), 116-123. [Google Scholar] [Crossref]

31. Muriithi, J. & Muigai, R. (2017). Quantitative analysis of operational risk and firm value of commercial banks using cost income ratio. IOSR Journal of Economics and Finance, 8(3), 76-89. [Google Scholar] [Crossref]

32. Monnie, B. (1998). Operational Guidelines for the Development and Early Stages of Credit Union Operations, World Council of Credit Unions, Inc. [Google Scholar] [Crossref]

33. Merkley, K. (2020). Narrative disclosure and earnings performance: Evidence from R&D disclosures. The Accounting Review 89 (2), 725–757. [Google Scholar] [Crossref]

34. Nyabwanga, R. N. (2013). An Empirical Analysis of the Liquidity, Solvency and Financial Health of Small and Medium Sized Enterprises in Kisii Municipality, Kenya. European Journal of Business and Management. 5(8), 1-23. ISSN 2222-2839. [Google Scholar] [Crossref]

35. Nobanee, H. & Ellili, N. (2017). Does operational risk disclosure quality increase operating cash flows? Brazillian Administration Review, 14(4), 1-13. [Google Scholar] [Crossref]

36. Odubuasi, A., Deborah, W. U., & Ifurueze, M. (2020). Effect of market risk on the financial performance of firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 8(6), 28- 45. [Google Scholar] [Crossref]

37. Olabisi, J., Kajola, S. O., Adeleke, E. O. & Gazal, T. H. (2020). Enterprise risk management and financial sustainability: evidence from Nigerian listed consumer goods firms. Journal of Sustainable Development in Africa, vol. 22(3), 1-20. [Google Scholar] [Crossref]

38. Okpala N. E., Ifurueze, M., & Ofor. N. (2021). Effect of Risk Management Disclosures on Performance of Firms’ in Nigeria and Ghana. Journal of Accounting and Financial Management, 7(4), 1-12. [Google Scholar] [Crossref]

39. Omaliko, E., & Nwadialor, E., & Nweze, A. (2020). Effect of non-financial disclosures on performance of non-financial firms in Nigeria. Journal of Accounting and Financial Management, 6(1), 16-39 [Google Scholar] [Crossref]

40. Qasim, S., & Ramiz, R. (2021). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business. 1 (7), 23-35. [Google Scholar] [Crossref]

41. Stolow, D. & Leigh, W. (2018). CDFI Risk Management Presentation at the National Community Capital Association Annual Conference, October 1999, Denver, Colorado. [Google Scholar] [Crossref]

• The Correlation of Marketing Strategies and Financial Performance of Motor Parts Businesses in the City of Mati
• The Role of Blockchain-Based Smart Contracts in Enhancing Financial Transparency and Efficiency in the Emerging Market
• Exploring Intention among Universiti Teknologi Mara Terengganu Community to Donate into Education Waqf Fund
• Utilizing AHP Method to Rank Preference of Waqf Fund Usage for UiTM Terengganu, Malaysia
• The Influence of Portfolio Diversification on Financial Performance: Evidence from Listed Banks on the Ghana Stock Exchange