VOLUNTARY DISCLOSURE AND BANK RISK EXPOSURE: OWNERSHIP-BASED EVIDENCE FROM INDIAN BANKS

Abstract

This study examines the relationship between voluntary disclosure and risk exposure among 33 listed Indian banks over a ten-year period (2014–2023). A Voluntary Disclosure Index (VDI) was developed across six regulatory-aligned categories, comprising 30 disclosure elements. Bank risk was measured using four proxies: credit risk (CRISK), liquidity risk (LDR), operational risk (OPRISK), and financial stability (ZSCORE). Panel data fixed effects regressions reveal that higher VDI scores are significantly associated with lower CRISK, LDR, and OPRISK, and with higher ZSCORE, indicating improved financial stability. The moderating role of ownership is confirmed through interaction models, which show that the impact of disclosure is notably stronger in private banks. Split-sample analysis further reinforces these differences while the robustness tests validate the consistency of results. The findings underscore the role of voluntary disclosure as a strategic risk management tool in the private banking sector, while highlighting the symbolic nature of disclosure in public banks. The study offers actionable insights for regulators, bank management, and investors to strengthen transparency frameworks and improve market discipline. It also opens avenues for future research into governance-disclosure-risk interlinkages in emerging markets.