Risk Information Practices in Annual Reports: An Indo-German Collaborative Comparison

This paper looks at the information given on risks as disclosed in Indian and German annual reports. Such annual reports are a method for overcoming the information asymmetry between investors and managers by gaining information on the performance and the associated risks of listed companies. They can also be of valuable for analysts and managers as a reference for their own reporting and (financial) analysis. We therefore analysed the annual reports of the companies in the Indian SENSEX index and compared them with the companies included in the German DAX index keeping in mind the regulatory framework of their operations. This was done with the help of an evaluation scheme, acting as a guideline for the qualitative content analysis. With disclosure requirements oscillating between mandatory and voluntary, we found that while companies of both indices comply with the mandatory requirements, information on voluntary basis, especially on numerical concrete risk reporting, can be improved, more so in the Indian context. Also, some companies in both economies have shown the way in comprehensively categorizing risk related information which can be adopted, where possible, by other companies in their respective indices. Overall, we found that (1) companies issue only few information on concrete risks, (2) the difference in information quality between the two samples is statistically significant, and (3) size and leverage can explain part of the variance within the samples.