Risk Reporting and Multiple Directorships: Evidence from Gulf Cooperation Council Markets
Risk reporting is one of the effective risk management procedures. It provides greater transparency, stimulates shareholders’ confidence, minimizes the information asymmetry between investors and agents, and helps investors to take effective and timely risk diversification. In this paper we investigate the association between Corporate Risk Disclosures (CRD) and multiple directorships of 1,051 year-observations of Gulf Corporation Council (GCC) listed firms from 2015 to 2018. Unlike previous studies in the GCC, we find multiple directorships are beneficial for firms. In specific, we find multiple directorships improve the firm’ corporate risk disclosures. Additional analyses show consistent results even when CRD is disaggregated into mandatory versus voluntary risk disclosures, financial versus non-financial risk disclosures and with market, empowerment, and damage risk disclosures. Results are robust with different measures of corporate risk disclosures and multiple directorships. This study gives new insights into recent corporate governance updates in emerging markets regarding number of corporate board sets. The empirical results demonstrate that firms with more board directorships is not detrimental as it helps to mitigate information asymmetry and agency costs.