Effect of risk disclosure on financial reporting quality of listed industrial goods companies in Nigeria

Abstract

This study examines the effect of risk disclosure on financial reporting quality of quoted industrial goods companies in Nigeria. The study adopts an ex-post facto research design and utilizes panel data obtained from the annual reports of selected quoted industrial goods firms in Nigeria over the study period. The results show that operational risk has a negative and significant effect on financial reporting quality of quoted industrial goods companies in Nigeria. Liquidity risk also has a negative and significant effect on financial reporting quality of quoted industrial goods companies in Nigeria. Credit risk has a positive and significant effect on financial reporting quality of quoted industrial goods companies in Nigeria. While market risk is negative but insignificant effect on financial reporting quality of quoted industrial goods companies in Nigeria. The study concludes that operational and liquidity risks are the most critical determinants of financial reporting quality, as inefficiencies in internal processes and constraints on resources significantly affect transparency and reliability. Credit risk can serve as a motivator for firms to enhance disclosure practices and maintain investor and creditor confidence, whereas market risk has limited direct influence on reporting quality. Based on these conclusions, it is recommended that industrial goods companies strengthen operational risk management through robust internal controls, process monitoring, and regular audits. Effective liquidity management strategies, including cash flow forecasting and short-term financing planning, should be implemented to minimize reporting lapses.