Quality of Risk Reporting of selected DAX Performance Index Corporations - An Empirical Analysis of Compliance

Abstract

The German legislator requires German stock corporations to state their risk reporting in their annual report in accordance with the German Accounting Standard. After the standard was updated in 2012, corporations had several years to implement the requirements of the standard correctly and accurately. As a result, the study seeks to determine the corporation's risk reporting quality, ranking them and present the current deficits in their risk reporting’s. The standards were used to develop an evaluation model in which the mandatory and recommended standards were weighted and then evaluated against each of the risk report sections of the examined corporations. As a result, each corporation received a compliance percentage for the standard's mandatory and recommended requirements, sectors, and standard categories (risk management system, individual risks and risk situation). In their risk reports, the examined corporations did not achieve an overall compliance degree of 60 per cent. Not all corporations were able to present their information in compliance with the DRS 20 standards. BMW, the Volkswagen Group, and Henkel attained the highest level of compliance. Deutsche Wohnen and Deutsche Post had the lowest degree of compliance. The risk reporting quality of the corporations examined was adequate since not a single corporation achieved a higher compliance degree of 60 per cent. Only a few corporations came close to achieving a high level of compliance. As well as several corporations viewed the significance of the mandatory and recommended standards differently.