The Importance of Risk Disclosure in Corporate Governance

Oct 13, 2025 by wbrum.org 87 views

Effect of Board Size, Audit Committee, Managerial Ownership, Firm Size and ROA on Corporate Risk Disclosure in Manufacturing Companies (Food & Beverage) listed on the Indonesia Stock Exchange in 2019-2021

In today's business world, transparency and disclosure of risk are crucial, especially for companies listed on the Stock Exchange. This study aims to examine the effect of the size of the Board of Commissioners (Board Size), Audit Committee (Audit Committee), Managerial Ownership (managerial ownership), company size (firm size), and return on assets (ROA) on disclosure of company risk in the manufacturing sector, particularly in the food and beverage industry listed on the Indonesia Stock Exchange from 2019 to 2021.

The Importance of Risk Disclosure in Corporate Governance

Risk disclosure is a critical aspect of corporate governance, as it enables investors to make informed decisions about their investments. Companies that fail to disclose risk information may face severe consequences, including loss of investor confidence and damage to their reputation. In this context, understanding the factors that influence risk disclosure is essential for companies to maintain transparency and accountability.

Research Methodology

This study employs an associative causal approach by utilizing secondary data. The research population includes manufacturing companies engaged in the food and beverage sector, with a total of 30 companies listed on the Indonesia Stock Exchange. Of these, the research sample was taken as many as 27 companies with the Purposive Sampling method. For data analysis, descriptive statistical analysis and multiple linear regression analysis are used.

Research Results

The results showed that simultaneously, Board Size, Audit Committee, Managerial Ownership, Firm Size, and ROA had a significant influence on the company's risk disclosure. However, when viewed from partial influence, it was found that the Board Size, Audit Committee, Managerial Ownership, and ROA did not have a significant effect on Corporate Risk Disclosure. Meanwhile, the firm size shows a positive effect on the disclosure of company risk.

Deeper Analysis

Disclosure of risk becomes an important aspect in company management because it can influence investor decisions. In the context of this research, the size of the Board of Commissioners and the Audit Committee can be considered to contribute in maintaining accountability, but it is not proven significantly affecting risk disclosure. This could be caused by the many external factors that affect the disclosure policy taken by the company.

Managerial ownership, which is often associated with the level of manager involvement in company ownership, also does not show a significant effect on risk disclosure. This might reflect the situation where managers feel that disclosure of risk information is not too important to protect their personal interests or there may be a lack of awareness of the importance of transparency among managers.

On the other hand, company size is proven to have a positive relationship with risk disclosure. Larger companies tend to be more bound by regulations and operate in tighter public supervision, so they tend to express more information related to risk. This shows that large companies are more aware of social responsibility and compliance with existing rules.

The Role of Company Size in Risk Disclosure

Company size is a critical factor in risk disclosure, as larger companies tend to be more transparent and accountable. This is because larger companies are more bound by regulations and operate in tighter public supervision, which encourages them to disclose more information related to risk. In contrast, smaller companies may not be as transparent, which can lead to a lack of investor confidence.

Implications for Stakeholders

This study emphasizes the importance of company size in influencing risk disclosure in the food and beverage sector listed on the Indonesia Stock Exchange. Although several other factors such as the size of the Board of Commissioners, Audit Committees, and Managerial Ownership do not show individual significant effects, these findings provide useful insights for stakeholders to increase transparency and corporate accountability.

Future Research Directions

In the future, there needs to be further efforts to understand the dynamics that affect risk disclosure in various industrial sectors. This study highlights the importance of company size in risk disclosure, but further research is needed to explore other factors that may influence risk disclosure. Additionally, researchers should investigate the impact of risk disclosure on investor decisions and company performance.

Conclusion

This study provides valuable insights into the factors that influence risk disclosure in the food and beverage sector listed on the Indonesia Stock Exchange. The findings suggest that company size is a critical factor in risk disclosure, and that larger companies tend to be more transparent and accountable. These findings have important implications for stakeholders, including investors, regulators, and company management. By increasing transparency and accountability, companies can maintain investor confidence and improve their reputation.

Recommendations for Practitioners

Based on the findings of this study, practitioners can take several steps to increase transparency and accountability in their companies. Firstly, companies should prioritize risk disclosure and ensure that they provide accurate and timely information related to risk. Secondly, companies should establish a strong audit committee to oversee risk management and ensure that risk disclosure is accurate and transparent. Finally, companies should consider the size of their Board of Commissioners and ensure that they have a diverse and experienced board that can provide effective oversight.

Limitations of the Study

This study has several limitations that should be acknowledged. Firstly, the study is based on secondary data, which may not be comprehensive or accurate. Secondly, the study only examines the food and beverage sector, which may not be representative of other industrial sectors. Finally, the study only examines the effect of company size on risk disclosure, which may not be the only factor influencing risk disclosure.

Future Research Directions

In the future, researchers should investigate the impact of risk disclosure on investor decisions and company performance. Additionally, researchers should explore other factors that may influence risk disclosure, such as company culture, leadership style, and industry characteristics. By understanding the dynamics that affect risk disclosure, researchers can provide valuable insights for stakeholders and help companies maintain transparency and accountability.
Q&A: Effect of Board Size, Audit Committee, Managerial Ownership, Firm Size and ROA on Corporate Risk Disclosure in Manufacturing Companies (Food & Beverage) listed on the Indonesia Stock Exchange in 2019-2021

In our previous article, we discussed the effect of Board Size, Audit Committee, Managerial Ownership, Firm Size, and ROA on Corporate Risk Disclosure in Manufacturing Companies (Food & Beverage) listed on the Indonesia Stock Exchange in 2019-2021. In this article, we will answer some of the most frequently asked questions related to this topic.

Q: What is the significance of risk disclosure in corporate governance?

A: Risk disclosure is a critical aspect of corporate governance, as it enables investors to make informed decisions about their investments. Companies that fail to disclose risk information may face severe consequences, including loss of investor confidence and damage to their reputation.

Q: What is the role of the Board of Commissioners in risk disclosure?

A: The Board of Commissioners plays a crucial role in risk disclosure, as they are responsible for overseeing the company's risk management and ensuring that risk information is accurate and transparent. However, our study found that the size of the Board of Commissioners did not have a significant effect on risk disclosure.

Q: What is the impact of Audit Committee on risk disclosure?

A: The Audit Committee is responsible for overseeing the company's financial reporting and risk management. However, our study found that the Audit Committee did not have a significant effect on risk disclosure.

Q: What is the relationship between Managerial Ownership and risk disclosure?

A: Managerial ownership refers to the level of manager involvement in company ownership. Our study found that Managerial Ownership did not have a significant effect on risk disclosure.

Q: What is the significance of company size in risk disclosure?

A: Our study found that company size has a positive relationship with risk disclosure. Larger companies tend to be more bound by regulations and operate in tighter public supervision, which encourages them to disclose more information related to risk.

Q: What are the implications of this study for stakeholders?

A: This study emphasizes the importance of company size in influencing risk disclosure in the food and beverage sector listed on the Indonesia Stock Exchange. Although several other factors such as the size of the Board of Commissioners, Audit Committees, and Managerial Ownership do not show individual significant effects, these findings provide useful insights for stakeholders to increase transparency and corporate accountability.

Q: What are the limitations of this study?

A: This study has several limitations that should be acknowledged. Firstly, the study is based on secondary data, which may not be comprehensive or accurate. Secondly, the study only examines the food and beverage sector, which may not be representative of other industrial sectors. Finally, the study only examines the effect of company size on risk disclosure, which may not be the only factor influencing risk disclosure.

Q: What are the future research directions?

A: In the future, researchers should investigate the impact of risk disclosure on investor decisions and company performance. Additionally, researchers should explore other factors that may influence risk disclosure, such as company culture, leadership style, and industry characteristics. By understanding the dynamics that affect risk disclosure, researchers can provide valuable insights for stakeholders and help companies maintain transparency and accountability.

Q: What are the recommendations for practitioners?

A: Based on the findings of this study, practitioners can take several steps to increase transparency and accountability in their companies. Firstly, companies should prioritize risk disclosure and ensure that they provide accurate and timely information related to risk. Secondly, companies should establish a strong audit committee to oversee risk management and ensure that risk disclosure is accurate and transparent. Finally, companies should consider the size of their Board of Commissioners and ensure that they have a diverse and experienced board that can provide effective oversight.

Q: What are the implications of this study for regulators?

A: This study highlights the importance of company size in risk disclosure, which has implications for regulators. Regulators should consider the size of companies when evaluating their risk disclosure practices and ensure that larger companies are held to higher standards of transparency and accountability.

Q: What are the implications of this study for investors?

A: This study emphasizes the importance of company size in risk disclosure, which has implications for investors. Investors should consider the size of companies when evaluating their risk disclosure practices and ensure that they are making informed decisions about their investments.

Q: What are the implications of this study for company management?

A: This study highlights the importance of company size in risk disclosure, which has implications for company management. Company management should prioritize risk disclosure and ensure that they provide accurate and timely information related to risk. Additionally, company management should establish a strong audit committee to oversee risk management and ensure that risk disclosure is accurate and transparent.