Research Gap:

This study has used three dimensions of the Corporate Governance Mechanism namely Board
Structure, Ownership Structure and Audit Structure as independent variables which have not
been used previously. Secondly in the absence of accounting standard on risk disclosure namely
“Financial Instruments: Disclosure” this study extends knowledge of risk disclosure in Pakistani
listed companies. Finally, the study contributes to risk disclosure literature in the Pakistan
context as previously researcher has focused very little on risk disclosure.

Research Question:

Main research question of this study is “Whether Corporate Governance predictors have
significant impact on Risk Disclosure of the firms listed on Pakistan Stock Exchange?”

Related Articles:

Analysing the determinants of narrative risk information in UK FTSE 100 annual reports by
Abraham.and Cox (2007).

Risk-related disclosures by non-finance companies: Portuguese practices and disclosure

characteristics by Oliveira.and Craig (2011)

Corporate governance and risk reporting in South Africa:a study of corporate risk disclosures in
the pre-and post-2007/2008 global financial crisis periods by Ntim and Thomas (2013),

Corporate governance, risk disclosure practices, and market liquidity: comparative evidence
from the UK and Italy by Elshandidy and Neri (2015)

The board’s role in risk disclosure: an exploratory study of Italian listed state-owned enterprises
by Allini and Hussainey (2016)
Dependent variable measurement:

Total Risk Disclosure is the total risk word count, including positive, negative and statistical
risk keywords;
Positive Risk Disclosure is the positive risk word count; and
Negative Risk Disclosure is the negative risk word count.

This study has adopted content analysis to analyse risk information in a complete annual report
as opposed to specific section. There are two principal methods of content analysis, which were
primarily adopted in risk disclosure literature: the manual method and the automated method.
Either method may adopt word, sentence or line as a unit of analysis.

Description of the Independent Variables:

The size of the board is estimated by the number of directors on the board
The existence of independent outside directors is deliberated by the percentage of outside
independent directors on the board,
The function of duality of CEO and chairman is measured by a binary variable. In case of
presence of duality it grabs the value 1 and 0 else.
Gender Diversity dummy variable, if women are present on the board 1, 0 otherwise
Frequency of the board meeting is gauged as occurrence of the meetings of the board in a year.
Efficiency of the board is an important variable to measure performance. Efficiency of the board
is measured through attendance of the member in board meetings and is the attendance
percentage of board members in the meetings.
In case of existence of Internal Audit committee of the Board it is 1 otherwise 0. Meeting
frequency of the committee is measured through number of meetings in a year. Size of the
committee is measured by number of members on the Internal Audit Committee.
External audit quality is an important variable to measure performance. Quality of the external
audit is measured through the size of audit firm which is approximated by binary system. If
audit firm is belonging to big four then it is 1 otherwise 0.
Government ownership concentration is measured through percentage of shareholding by
government.
Foreign and Institutional ownership concentration is calculated through percentage. Individual
shareholders ownership has been calculated 5% shareholding other than Government, Foreign
and Institutional shareholding.
Sample Selection

Sr.No Author Country Sample

10 non financial listed companies from 5 sectors
Ntim, Lindop and South
1 having highest market capitalization in the sector.
Thomas (2013) Africa
Total 50 companies with data from 2002 to 20011.
Oliveria and 8 sectors with 81 non financial listed companies of
2 Portugal
Rodrigues (2011) Portugal with 2005 year data.
Allesendra Allini
3 and Khaled Hussani Italy Italian listed 17 SOEs with data from 2008 to 2010
(2015)
Tamer Elshandidy
300 non financial listed companies with data from
4 and Lorenzo Neri UK, Italy
2005 to 2010.
(2015)
Santosh Abrahem 78 non financial companies based on market
5 UK
and Paul Cox (2007) capitalization for year 2002.