Beyond Governance Compliance: Risk Management Committees, Risk Disclosure, and Financial Performance in a Frontier Market

Abstract

This study is two-fold. First, it examines the impact of risk management committee characteristics on the level of risk information disclosure (financial, non-financial, and total risk disclosure). Second, it investigates the effect of risk disclosure on financial performance measured by return on equity (ROE). Data were collected from the annual reports of 39 banking and insurance companies listed on the Amman Stock Exchange (ASE) during the 2019–2023 period, resulting in 195 initial firm-year observations. After excluding 64 firm-year observations for which risk management committee (RMC) characteristics were unavailable, the final regression sample comprised 131 firm-year observations. Multiple linear regression analysis was employed to test the study hypotheses. The findings indicate that risk disclosure improves with greater committee activity, as measured by the frequency of committee meetings. The results also reveal a significant negative relationship between committee size and non-financial risk disclosure. However, no significant relationship was found between risk disclosure and ROE. The findings demonstrate that governance effectiveness depends more on active committee engagement than on formal committee characteristics, extending current understanding of Risk Management Committee effectiveness. By distinguishing between financial and non-financial risk disclosure, the study provides a more nuanced explanation of how governance mechanisms influence organisational transparency within frontier market environments.