The Impact of Risk Disclosure on Investment Efficiency: Evidence From Egypt

This study aims to investigate the impact of risk disclosure on investmentefficiency. The study tests hypotheses using a sample of 84 Egyptian companies registered on Stock Exchange for the period (2014-2018). The researcher uses content analysis to calculate a risk disclosure index (RDI) from annual reports and study how it impacts the efficiency of investment in companies. The results show that there is a negative and significant relation between risk disclosure and investment, meaning that in light of the increase (decrease) in risk disclosure, companies have less (more) investment efficiency. This result is consistent with the divergence hypothesis, which indicates thatwhen discloses details about risk information, investors can realize that the company is facing risks, so they demand more compensation to avoid uncertain risks, or at least withdrawn their equity ownership. This affects the inefficiency of investment. The study divided the sample into two groups: overinvestment and underinvestment, to test the impact of annual risk disclosure on investment. The results show a significant and negative relation between the overinvestment group and risk disclosure, while it is insignificant in the under investment group and risk disclosure whereas it indicates that risk disclosure can enhance the efficiency of investment mainly by limiting ineffective investment conduct. These results supported the literature on both risk disclosure and investment efficiency.