How Informative is Risk Reporting?– A Review of Disclosure Models –

Risk reporting is an emerging reporting challenge in Europe. Current literature assumescorporate risk reporting to be informative for its users. The purpose of this paper is toinvestigate in how far risk disclosures can meet the information function alleged.Embedded in frameworks of economics of information and of risk management, asubstantial review and discussion of discretionary disclosure models, including cheaptalk-models, provides a sound basis for assessing the information value provided by riskreports. The results are manifold. First, the review highlights strong incentives fordiscretion and manipulation by the manager who can use the report as a measure ofhandling derivative risks.[...]