The Value Relevance of Risk Disclosure and Risk Governance: Efforts to Maintain Sustainability in the Banking Industry

¹ Accounting Study Program, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Indonesia
² Accounting Study Program, Faculty of Economics and Business, UPN “Veteran” Yogyakarta, Indonesia
³ ICLON (Leiden University Graduate School of Teaching), Research Department, Faculty of Social and Behavioural Sciences, Netherlands

^* Corresponding author: etikkresnawati@umy.ac.id

Abstract

As a financial institution with an essential role in developingthe economy and national development, banks are required to have good financial performance. During the COVID-19 pandemic, many banks were affected, which increased their credit risk. In various conditions, banks need to make efforts to maintain their performance. This study, thus, aims to examine these efforts by examining the role of risk governance in moderating the value relevance of risk disclosure in the banking industry listed on the Indonesia Stock Exchange for the period 2018-2022. In two different economic conditions (before and during COVID-19), management efforts to explain the management of the company through risk disclosure and governance should have a positive impact on the sustainability of the company. Tests conducted on 145 firm samples with the Generalized Least Squares model revealed that risk disclosure and risk governance exert a positive effect on market performance. However, risk governance weakens risk disclosure in terms of market performance.