Evaluation of Financial Risk Disclosure and Financial Performance of Listed Financial Institutions in Nigeria

Abstract

This study was prompted by the observed decline in the performance of listed financial institutions in Nigeria. Its primary objective was to assess how disclosing operational risks affects the financial performance of these institutions listed on the Nigerian Exchange Group (NGX). The research employed ex-post facto and panel data research designs, using data extracted from the audited financial statements of listed financial institutions over a ten-year period from 2012 to 2021. The study focused on a population of thirty-four listed financial institutions, including nineteen deposit money banks and fifteen insurance companies on the NGX. A purposive sampling technique was applied, investigating twenty of these firms due to the availability of complete data. The descriptive statistic and panel regression analysis were adopted. The overall results showed that financial risk disclosure had a statistically significant effect on the financial performance of listed financial institutions in Nigeria. It was concluded that financial institutions in Nigeria need to improve their financial performance through reasonable corporate risk disclosure. Financial institutions should consider prioritizing the disclosure of specific risk factors, particularly Currency Risk Disclosure and Capital Management Risk Disclosure, to improve their financial performance. Improved reporting practices in these areas may positively impact the Return on Equity, Return on Assets, and Tobin's Q of these institutions.