Risk reporting. Evidence from London Stock Exchange

This study intends to provide evidence of the risk disclosures of a sample of companies analysing their annual reports for three years (2010, their annual reports from 2010 to 2012 and these companies are also allocated by five industries. These five industries are General Retailers, Food Producers, Travel and Leisure, Support Services and Construction and Materials. Particularly, the objectives of this research are: i. Empirically focusing on the risk disclosure regulation in UK; finding out what they are, which regulations point out implementation of risk disclosure in an annual report and how the companies presented their risk disclosure in terms of the regulations. ii. Meticulously, studying the companies` risk disclosure from 2010 to 2012 in their annual reports, what the differences between their annual reports from 2010 to 2012 are and whether they are reputation or specific risk disclosures. iii. Comparing and contrasting the same industry companies` risk disclosures and general aspects of risk disclosures in the chosen companies` annual report from 2010 to 2012. The analysis aims to evaluate the risk disclosure of the companies examined. There is a main point that the risk disclosures of the companies are changed or repeated. If it is changed or repeated, these changes or repetition of their risk disclosure would give some ideas about companies’ risk disclosures and industry outlook which can help investors and other users in order to make decisions.This work adopted two approaches involving quantitative and qualitative methods. According to Anderson (2009), there are several compensation outcomes from using of mixed methods that can display the complex of problems, enable a great understanding and imply a useful information for more-depth research. In brief, firstly, the research starts with analysing whether information is a risk disclosure or not. Any identification or statement which is not including risk criteria does not count as a risk disclosure in this study. Secondly, it allocates risk disclosure as narrative and numerical data. The given codes are displayed as QC- Qualitative Characteristic and QNC- Quantitative Numerical Characteristic. QC has two branches which are replacement of risk disclosure and time orientation and type of risk disclosures. QNC only analyses numerical data. Final stage is to collect all findings of risk disclosure. This study uses content analysis which can convert qualitative into quantitative information with using labelling system that gives numbers to the sentences. This study is based on sentence analysis and consider theme which can relate to the meaningful messages of a risk disclosure from directors. Words, even if used in other recent studies (Neri, 2011; Neri and Russo, 2013) will not be counted as it is not the method of this study. Analysing the sentences indicates that this study uses manual approach. According to Deumes (2008) the advantages of the manual method is more useful than computer based method. Content analysis can be better valuated by a person who can plainly work out the meaning of phrases or words in sentences. Nevertheless, the manual method has detriments which are being less flexible and time consuming, more likely to make mistakes and researcher biases (Krippendorff, 2004). On the other hand, numerical code, which is called labelling system in this study, is used for qualitative or quantitative information in order to have accurate and reliable outcomes. The research has been allocated into five steps which are explained and given in chapter 3. Categorising risk is the most significant instrument in this study. Narrative and numerical risk disclosure information used the same categorising which is adopted from Linsley and Shrives (2006) and ICAEW (2011)