The Impacts of Board Characteristics and Size on Risk Disclosure: Evidence from Indonesian Mining Firms
DOI:
https://doi.org/10.14414/jebav.v25i3.3435Keywords:
Board characteristics, Corporate risk disclosure, COSO framework, Enterprise risk managementAbstract
This study examines how board characteristics (gender, education, and age) and board size can impact corporate risk disclosure (CRD) in quantity and coverage. This research differs from previous studies because we use the newest COSO framework (2017) to measure CRD. We analyzed the data using multiple regression analysis. The results show no relationship between the composition of female directors in both CRD coverage and quantity. Board size positively affects CRD coverage and quantity, while board age negatively affects those two types of CRD. However, board education does not influence CRD quantity and coverage. This study also indicates that board size and age substantially impact the level of risk disclosure. For investors, the board's age and size become an essential consideration in investment decisions related to risk information. While policymakers in Indonesia urgently need a further discussion of the implementation of guidelines to promote higher levels of risk disclosure among firms since the difference in the basis for disclosing risk will reduce the company's competitiveness in the same industry.References
A Watters, T., L Shoesmith, J., Lemos-Stein, G., & Nietvelt, K. (2021). Industry Risk Assessments Update: Jan. 25, 2021 | S&P Global Ratings. S&P Global Ratings. https://www.spglobal.com/ratings/en/research/articles/210125-industry-risk-assessments-update-january-2021-11811292
Agnew, J. R., Anderson, L. R., Gerlach, J. R., & Szykman, L. R. (2008). Who Chooses Annuities? An Experimental Investigation of the Role of Gender, Framing, and Defaults. American Economic Review, 98(2), 418–422.
Akerlof, G. A. (1978). The Market For “Lemonsâ€: Quality Uncertainty And The Market Mechanism. Uncertainty in Economics, 235–251.
Allegrini, M., & Greco, G. (2013). Corporate boards, audit committees and voluntary disclosure: Evidence from Italian Listed Companies. Journal of Management and Governance, 17(1), 187–216.
Allini, A., Manes Rossi, F., & Hussainey, K. (2016). The board’s role in risk disclosure: an exploratory study of Italian listed state-owned enterprises. Public Money & Management, 36(2), 113–120.
Allini, A., Manes Rossi, F., & Macchioni, R. (2014). Do Corporate Governance Characteristics Affect Non-Financial Risk Disclosure in Government-owned Companies? : the Italian Experience. Financial Reporting, 1, 5–31.
Alshirah, M. H., Abdul Rahman, A., & Mustapa, I. R. (2020). Board of directors’ characteristics and corporate risk disclosure: the moderating role of family ownership. EuroMed Journal of Business, 15(2), 219–252.
Amran, A., Manaf Rosli Bin, A., & Che Haat Mohd Hassan, B. (2009). Risk reporting: An exploratory study on risk management disclosure in Malaysian annual reports. Managerial Auditing Journal, 24(1), 39–57.
Andira, M. H., & Ratnadi, N. M. D. (2022). Latar Pendidikan Dewan Direksi, Dewan Komisaris, Komite Audit dan Praktik Manajemen Laba Riil. E-Jurnal Akuntansi, 32(1), 3468.
Andriani, J., & Winarno, W. W. (2021). Pengaruh Struktur Kepemilikan Saham Publik, Kompleksitas Perusahaan, Usia Dewan Direksi terhadap Ketepatan Waktu (Timeliness) Penyampaian Laporan Keuangan. Jurnal Ilmiah Akuntansi Dan Finansial Indonesia, 5(1), 39–48.
Ararat, M., Aksu, M., & Tansel Cetin, A. (2015). How Board Diversity Affects Firm Performance in Emerging Markets: Evidence on Channels in Controlled Firms. Corporate Governance: An International Review, 23(2), 83–103.
Bernile, G., Bhagwat, V., & Yonker, S. (2018). Board diversity, firm risk, and corporate policies. Journal of Financial Economics, 127(3), 588–612.
Borghans, L., Golsteyn, B. H. H., Heckman, J. J., & Meijers, H. (2009). Gender Differences in Risk Aversion and Ambiguity Aversion. Journal of the European Economic Association, 7(2–3), 649–658.
Brown, I., Steen, A., & Foreman, J. (2009). Risk management in corporate governance: A review and proposal. Corporate Governance: An International Review, 17(5), 546–558.
Bufarwa, I. M., Elamer, A. A., Ntim, C. G., & AlHares, A. (2020). Gender diversity, corporate governance and financial risk disclosure in the UK. International Journal of Law and Management, 62(6), 521–538.
Cabedo, J. D., & Tirado, J. M. (2004). The disclosure of risk in financial statements. Accounting Forum, 28(2), 181–200.
Christiansen, L. E., Lin, H., Pereira, J., Topalova, P., & Turk, R. (2016). Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe. IMF Working Papers.
Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2), 329–356.
COSO. (2017). Enterprise Risk Management. Integrating with strategy and performance. In Committee of Sponsoring Organizations of the Treadway Commission: Vol. II (Issue June). https://www.coso.org/Documents/2017-COSO-ERM-Integrating-with-Strategy-and-Performance-Executive-Summary.pdf
Desender, K. A., & Lafuente, E. (2009). The Influence of Board Composition, Audit Fees and Ownership Concentration on Enterprise Risk Management. SSRN Electronic Journal, 12(January), 1–40.
Ellix, H., Mussacaleca, M., Farmer, K., Kowalik, L., Little, R., Moonsamy, T., Phillip, R., & Zapata, G. (2021). Why women are leaving the mining industry and what mining companies can do about it | McKinsey. McKinsey & Company. https://www.mckinsey.com/Industries/Metals-and-Mining/Our-Insights/Why-women-are-leaving-the-mining-industry-and-what-mining-companies-can-do-about-it
Elmarzouky, M., Albitar, K., & Hussainey, K. (2021). Covid-19 and performance disclosure: does governance matter? International Journal of Accounting and Information Management, 29(5), 776–792.
Europen Commission. (2022). Commission welcomes political agreement on Gender Balance on Corporate Boards. June.
Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk-taking, and the efficiency of capital allocation. Journal of Corporate Finance, 39, 193–209.
Falendro, A., Faisal, & Ghozali, I. (2018). Karakteristik Dewan Komsiaris. Jurnal Reviu Dan Akuntansi Keuangan, 8(2), 17–31.
Fitania, D. N., & Firmansyah, A. (2020). The Effect Of Geographic Diversification, Competition Level, And Corporate Governance On Risk Disclosure. International Journal of Scientific & Technology Research, 9(3), 366–372.
Freeman, R. E. (1984). Strategic management : a stakeholder approach. Boston: Pitman Publishing Inc.
Giopani, M. (2021). Tantangan Perempuan Indonesia Berprofesi di Industri Pertambangan Migas. https://www.voaindonesia.com/a/tantangan-perempuan-indonesia-berprofesi-di-industri-pertambangan-migas/5832837.html
Green, C. P., & Homroy, S. (2018). Female directors, board committees and firm performance. European Economic Review, 102, 19–38.
Greene, W. H. (2020). Econometric Analysis. Global Edition. Pearson.
Hambrick, D. C., & Mason, P. A. (1984). Upper Echelons: The Organization as a Reflection of Its Top Managers. Academy of Management Journal, 9(2), 193–206.
Hartog, J., Ferrer-i-Carbonell, A., & Jonker, N. (2002). Linking Measured Risk Aversion to Individual Characteristics. Kyklos, 55(1), 3–26.
Hoechle, D. (2007). Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence. The Stata Journal, 7(3), 281–312.
Hooghiemstra, R., Hermes, N., & Emanuels, J. (2015). National Culture and Internal Control Disclosures: A Cross-country Analysis. Corporate Governance: An International Review, 23(4), 357–377.
Hutcheson, G. and Sofroniou, N. (1999). The Multivariate Social Scientist Introductory Statistics Using Generalized Linear Models. Sage Publication, Thousand Oaks, CA.
International Corporation Finance. (2019). Board Gender Diversity in ASEAN. In Board Gender Diversity in ASEAN.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Corporate Governance: Values, Ethics and Leadership, 3(4), 305–360.
Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. Corporate Governance: Values, Ethics and Leadership, 4, 77–132.
Joecks, J., Pull, K., & Vetter, K. (2013). Gender Diversity in the Boardroom and Firm Performance: What Exactly Constitutes a “Critical Mass?†Journal of Business Ethics, 118(1), 61–72.
John, N. A., & Edmeades, J. (2017). Gender Socialization During Adolescence in Low and Middle Income Countries: Why Should We Care? PAA 2017 Annual Meeting, 19, 1–63. www.unicef-irc.org
Jung, C. G., Adler, G., Fordham, M., Read, H., & McGuire, W. (2014). The collected works of C.G. Jung: Complete digital Edition. In The Collected Works of C.G. Jung: Complete Digital Edition.
Kanter, R. M. (1977). Men and Women of the Corporation - Book - Faculty & Research - Harvard Business School. New York: Basic Books.
Khandelwal, C., Kumar, S., Madhavan, V., & Pandey, N. (2020). Do board characteristics impact corporate risk disclosures? The Indian experience. Journal of Business Research, 121, 103–111.
Kim, H., & Yasuda, Y. (2018). Business risk disclosure and firm risk: Evidence from Japan. Research in International Business and Finance, 45, 413–426.
Konrad, A. M., Kramer, V., & Erkut, S. (2008). Critical Mass:. The Impact of Three or More Women on Corporate Boards. Organizational Dynamics, 37(2), 145–164.
Koufopoulos, D., Zoumbos, V., Argyropoulou, M., & Motwani, J. (2008). Top management team and corporate performance: A study of Greek firms. Team Performance Management, 14(7–8), 340–363.
Kurniawanto, H., & Agustiningsih, W. (2017). Corporate Governance and Corporate Risk Disclosure: Empirical Evidence of Non-Financial Companies Listed in Indonesia Stock Exchange. Review of Integrative Business and Economics Research, 6(4), 255–270.
Larmou, S., & Vafeas, N. (2010). The relation between board size and firm performance in firms with a history of poor operating performance. Journal of Management and Governance, 14(1), 61–85.
Latif, R. A., Kamardin, H., Mohd, K. N. T., & Che Adam, N. (2013). Multiple Directorships, Board Characteristics and Firm Performance in Malaysia. Management, 3(2), 105–111.
Madrigal, M. H., Aibar Guzmán, B., & Aibar Guzmán, C. (2015). Determinants of corporate risk disclosure in large Spanish companies: a snapshot. ContadurÃa y Administración, 60(4), 757–775.
Malik, M. F., Zaman, M., & Buckby, S. (2020). Enterprise risk management and firm performance: Role of the risk committee. Journal of Contemporary Accounting and Economics, 16(1). https://doi.org/10.1016/j.jcae.2019.100178
Manita, R., Bruna, M. G., Dang, R., & Houanti, L. (2018). Board gender diversity and ESG disclosure: evidence from the USA. Journal of Applied Accounting Research, 19(2), 206–224. https://doi.org/10.1108/JAAR-01-2017-0024
Martikainen, M., Kinnunen, J., Miihkinen, A., & Troberg, P. (2015). Board’s financial incentives, competence, and firm risk disclosure: Evidence from Finnish index listed companies. Journal of Applied Accounting Research, 16(3), 333–358.
Mcdivitt, J. (2002). Status of Education of Mining Industry Professionals.
Miihkinen, A. (2012). What Drives Quality of Firm Risk Disclosure?: The Impact of a National Disclosure Standard and Reporting Incentives under IFRS. The International Journal of Accounting, 47(4), 437–468.
Nguyen, T. M. H., Nguyen, N. T., & Nguyen, H. T. (2020). Factors Affecting Voluntary Information Disclosure on Annual Reports: Listed Companies in Ho Chi Minh City Stock Exchange. The Journal of Asian Finance, Economics and Business, 7(3), 53–62.
OJK (2014). Peraturaan Otoritas Jasa Keuangan Nomor 33/POJK.04/2014 Tentang Direksi dan Dewan Komisaris Emiten Atau Perusahaan Publik. Jakarta: OJK
OJK (2015). Peraturan Otoritas Jasa Keuangan Republik Indonesia No 55 /POJK.04/2015 Tentang Pembentukan Dan Pedoman Pelaksanaan Kerja Komite Audit. Jakarta: OJK.
OJK (2016). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 18/POJK.03/2016 tentang Penerapan manajemen risiko bagi Bank Umum, Jakarta: OJK.
OJK (2021). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 6/POJK.04/2021 tentang Penerapan Manajemen Risiko bagi Perusahaan Efek yang Melakukan Kegiatan Usaha Sebagai Penjamin Emisi Efek dan Perantara Pedagang Efek yang merupakan Anggota Bursa Efek. Jakarta: OJK..
OJK (2021). Surat Edaran Otoritas Jasa Keuangan Republik Indonesia Nomor 16/SEOJK.04/2021 Tentang Bentuk dan Isi Laporan Tahunan Emiten atau Perusahaan Publik. Jakarta: OJK..
Perryman, A. A., Fernando, G. D., & Tripathy, A. (2016). Do gender differences persist? An examination of gender diversity on firm performance, risk, and executive compensation. Journal of Business Research, 69(2), 579–586.
Pijoh, D. V. ., Pratama, B. ., Pramono, H., & Hapsari, I. (2022). View of Risk Disclosure in Indonesian Banking_ The Role of Board of Directors and Institutional Ownership.pdf. Jurnal Ekonomi Dan Bisnis Digital (Ministal), 1(4), 347–366.
Poletti-Hughes, J., & Briano-Turrent, G. C. (2019). Gender diversity on the board of directors and corporate risk: A behavioural agency theory perspective. International Review of Financial Analysis, 62, 80–90.
Prabowo, M. A., Iswaningtyas, A., Syofyan, E., Idris, I., Mulazid, A. S., & Habbe, A. H. (2017). Board of directors and CSR disclosure in Indonesian banking industry: does education matter? International Journal of Trade and Global Markets, 10(4), 322.
PwC. (2019). Mining in Indonesia: Investment and Taxation Guide. PricewaterhouseCoopers Indonesia, June, 175. https://www.pwc.com/id/en/energy-utilities-mining/assets/mining/mining-guide-2019.pdf
Ramadhani, Z. I., & Adhariani, D. (2014). Pengaruh Keberagaman Gender Terhadap Kinerja Keuangan Perusahaan dan Efisiensi Investasi. Simposium Nasional Akuntansi XVIII, 1–20.
Rankin, M., Ferlauto, K., McGowan, S. (Susan C. ., & Stanton, P. A. (2017). Contemporary issues in accounting.
Rooly, M. S. A. R. (2021). Impact of Board Diversity on Agency Costs in the Context of Agency Theory Approach: Evidence From Listed Companies in Sri Lanka. Indian Journal of Corporate Governance, 14(2), 133–153.
Setiaji, H. (2022). Harga Batu Bara Naik Lagi, Rekor Lagi! Gara-gara Indonesia... https://www.cnbcindonesia.com/market/20220308062651-17-320777/harga-batu-bara-naik-lagi-rekor-lagi-gara-gara-indonesia
Setiawan, D., Hapsari, R. T., & Wibawa, A. (2018). Dampak Karakteristik Dewan Direksi Terhadap Pengungkapan Corporate Social Responsibility Pada Perusahaan Pertambangan Di Indonesia. Mix: Jurnal Ilmiah Manajemen, 8(1), 1.
Soebyakto, B. B., Mukhtaruddin, Relasari, & Sinulingga, A. (2018). Company characteristics and risk management disclosure: empirical study of manufacturing companies listed on the Indonesia stock exchange. Problems and Perspectives in Management, 16(2), 396–411.
Suhardjanto, D., Dewi, A., Rahmawati, E., & M, F. (2012). Peran Corporate Governance Dalam Praktik Risk Disclosure Pada Perbankan Indonesia. Jurnal Akuntansi Dan Auditing, 9(1), 16–30.
Taylor, R. N. (1975). Age and Experience as Determinants of Managerial Information Processing and Decision Making Performance. Journal of Allergy and Clinical Immunology, 18(1), 74–81.
Thoomaszen, S., & Hidayat, W. (2020). Keberagaman Gender Dewan Komisaris dan Direksi terhadap Kinerja Perusahaan. E-JUrnal Akuntansi, 30(10), 2698–2712.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171–180.
Wijayanti, R., Rina Ariani, K., Suyatmin Program Studi Akuntansi, S., Ekonomi dan Bisnis, F., Muhammadiyah Surakarta, U., & Suyatmin, S. (2022). The Role of Corporate Governance Mechanism on Disclosure of Enterprise Risk Management in Indonesian Banking Industry. Riset Akuntansi Dan Keuangan Indonesia, 7(1), 117–126.
