University of Twente Student Theses


Corporate Risk Disclosure: The Effect of Leverage on Internal Control Reporting

Collins, Michael (2022) Corporate Risk Disclosure: The Effect of Leverage on Internal Control Reporting.

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Abstract:In the 21st century, there has been an inconceivable number of fraudulent practices regarding public firms hiding the real performance of the company to create false opinions from investors. This has led to a strict regulation on risk disclosure in the US. However, in the UK, risk disclosure regulation is still considered more lenient than their Anglo-Saxon counterparts. The objective of this thesis is to investigate if there is a relationship between financial leverage and internal control disclosure quality using a data sample of 70 firms listed on the FTSE 100 exchange for the year-end, 2020. The study uses leverage as the independent variable and a self-developed internal control disclosure index as the dependent variable. The findings unveil a positive relationship between leverage and the internal control disclosure index. This would imply that the risk disclosure regulation of the UK is adequate for the investor. The more leveraged firms disclose a higher quality of information surrounding the management of business risks.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Keywords:Leverage, Internal control disclosure, Shareholder, Agency theory, Trade off theory, Debt-equity
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