RISK MANAGEMENT AND DISCLOSURE AND THEIR IMPACT ON FIRM VALUE: THE CASE OF EGYPT

Mohamed Hassan Abdel-Azim
Cairo University, Giza, Egypt
Zakia Abdelmoniem
International Academy of Engineering and Media Sciences, Egypt
ABSTRACT
This study investigates the impact of risk management and disclosure on firm value. The
study aims at investigating three relationships; the first is the relationship between risk
management and firm value. The second is the relationship between corporate voluntary
disclosure and systematic (market/beta) risk. The third is the relationship between voluntary
disclosure and firm value. The study population consists of non-financial companies listed on the
Egyptian Stock Exchange (EGX) at the year-end of 2012.
For testing the first relationship; the logistic model developed by Wang, Li, and, Z.
(2010) is used, and Tobin’s Q ratio is used for calculating firm value. The logistic model
developed by Hassan, Gianluigi, and Power (2011) is followed in measuring the second
relationship. The Capital Asset Pricing Model (CAPM) Model is used for calculating Beta for
systematic market risk, and the voluntary disclosure is measured using the disclosure index
technique including 26 financial and non-financial items. The third relationship is tested by
modifying Rahmat and Hoffman (2011) model.
The results indicate that a positive relationship exists between risk management and firm
value, a negative relationship exists between voluntary disclosure and the market risk exposure,
and a positive relationship exists between voluntary disclosure and firm value.