The Mediator Role of Risk Management in the Relationship between Business Strategy and Tone of Risk Disclosure

The main objective of this research is to determine the impact of risk management on the relationship between business strategy and firm’s risk disclosure.

The research hypotheses were tested based on combined data and using multiple regression models. In addition, the mediation effect was assessed using the Sobel test. The period of this study is from 2015 to 2020, during which time exaggerated data from 126 companies were examined.

The results of this study show that the type of business strategy has a direct impact on the risk management framework of firms listed on the Tehran Stock Exchange. Thus, defensive business strategy leads to stronger risk management than offensive business strategy which creates weaker risk management. Even though business strategy does not have a direct impact on corporate disclosure, organizational risk management as a mediating variable leads firms with a defensive approach to adopt a more negative tone and firms with an offensive approach to adopt a more positive tone.

Although the type of firm's business strategy does not directly influence the tone of risk disclosure, risk management as a mediator variable causes the extent of firm risk appetite, or in other words its business strategy, to have an inverse relationship with the tone of risk disclosure.

Contribution:

 The literature review in the field of risk disclosure shows that there is no study that addresses the management factors including business strategy and risk management that have an invisible influence on the tone of risk disclosure. Therefore, this study aims to develop the literature in this area to help researchers and legislators in the capital market field to explain new policies and laws, and to help shareholders in the capital market to make predictions and assessments when relying on the tone of risk disclosure.