Risk disclosure, cost of capital and bank performance

Purpose This study aims to examine the relationship among corporate risk disclosure, cost of equity capital and performance within banking institutions in a developing country setting. The authors argue that corporate risk disclosure reduces the cost of capital as investors attain better information and have confidence in the business and that less risk disclosure may generate ambiguity for potential stakeholders. Design/methodology/approach This study uses the population of all 30 listed banks on the Dhaka Stock Exchange, Bangladesh, for the years 2006 to 2012 and uses three-stage least-squares simultaneous equations to deal with endogeneity issues. Findings There is evidence that Bangladesh has voluntarily adopted the International Financial Reporting Standard 7 – Financial Instruments: Disclosures (IFRS 7) and Basel II: Market Discipline…