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The Effect of the 2007/2008 Financial Crisis on Enterprise Risk Management Disclosure of Top US Banks

We document the effect of the 2007/2008 financial crisis on the volume and the quality of enterprise risk management (ERM) disclosure in the annual reports of the largest US banks, and analyze its determinants. Using a content analysis approach of the annual reports form 10-K for the years 2006, 2007, 2008, and 2009, we find that the ERM disclosure is significantly and positively associated with the crisis, bank size, board independence, duality and significantly and negatively associated with profitability, leverage, and board size. This paper seeks to fill a gap in the literature by investigating the effect of the crisis on ERM disclosure in the US banking sector context, and gives an insight into the factors affecting risk disclosure practices during the financial crisis.


Introduction
Due to technological development, the increasing pace of international business and the rapid development of sophisticated financial instruments which allow the interconnections of international relations to expand and to become more complex, the late 20th century and the early 21st century witnessed the rise of a new spectrum of risks surpassing the traditional ones.
At a time when the volatility and uncertainty of the economic and business environment continue to increase, understanding the risks and their evolution becomes a crucial issue. This leads to a much greater awareness of the importance of implementing a risk management framework capable of dealing permanently with emerging risks (using an integrated risk management process) rather than treating each new risk separately (using the old silo form for the risk management process).
Thus, the enterprise risk management (ERM) process takes an important place in both financial and non-financial companies and especially in the banking industry considered to be the most heavily regulated industry in the world since banks play a crucial role in the process of money creation. It is also the most fragile and vulnerable to contagion because of the interconnection between the banking sector and other sectors of the economy which causes the financial crisis to spread.
This was recently demonstrated through the subprime crisis of 2007-2008 that has been considered the worst since the great depression of 1929. The securitization of non-performing loans mainly related to mortgages and the collapse of the US subprime mortgage market were the primary causes of the subprime crisis. The loss of confidence was the major consequence linked to the massive devaluation of mortgage backed securities resulting from falling real estate prices. The collapse of the "too-big to fail" banks has worsened the situation (Estay & Maurer, 2014). Considered as systematically important institutions 1 , their failure caused the disruption of the broader financial system.
Besides the subprime crisis, the long series of the crises that buffeted the global economy since the 1970s has revealed the failure of the corporate governance system and has questioned the efficiency of financial reporting and its role in communicating all relevant information and in reducing information asymmetries between outside actors and insiders. According to the Association of Chartered Certified Accountants (ACCA, 2013, p. 15), "Investors' confidence in company reporting has fallen -almost 7 out of 10 investors say they have become more skeptical about information from companies since the financial crisis". Thus, an effective ERM must be equipped with an appropriate form of risk disclosure, in order to reduce the uncertainty that rose after the financial turmoil and caused the banks to be more vulnerable and exposed to risks. The lack of transparency concerning financial instruments leads investors to erroneously assess the risks related to these financial instruments.
In this context, attention dedicated to risk disclosure in annual reports of companies has increased substantially, and many academic research studies investigated this topic (see Beretta & Bozzolan, 2004;Lajili & Zéghal, 2005;Linsley, Shrives, & Crumpton, 2006;Abraham & Cox, 2007;Dobler, Lajili, & Zéghal, 2011;Maingot, Quon, & Zéghal, 2012;Ntim, Lindop, & Thomas, 2013;Abraham & Shrives, 2014). All of them used content analysis in order to assess the presence of risk disclosure in annual reports, but few have investigated the effect of the crisis on the quality and the volume of ERM disclosure.
Many theories support the motivation of banks to report more information about their risks especially after the crisis. On one hand, agency theory states that firms are incited to raise their risk management disclosure in order to mitigate information asymmetry problems and to avoid agency costs (Jensen & Meckling, 1976). On the other hand, following the financial crisis, banks' reputations and investor confidence have been altered. In following legitimacy and signaling theory, banks will be prompted to disclose more ERM information (Ntim et al., 2013;Abraham & Shrives, 2014). This leads us to wonder if the financial crisis has had any impact on risk management disclosure in the annual reports of the American banking firms.
The objective of this research is to investigate the effect of the subprime crisis on ERM disclosure in the annual reports of the largest US banks, and to find out its determinants.
We used a content analysis of the annual reports of 59 largest US banks for the years 2006, 2007, 2008, and 2009 to assess the volume and the quality of ERM disclosure. The volume and the quality were measured using the natural logarithm of the number of sentences containing information about ERM as in Beretta and Bozzolan (2004), Lajili and Zéghal (2005), , and a self-constructed index which was based on prior studies (Leitner-Hanetseder, 2012;Van Beest, Braam, & Boelens, 2009; Basel Committee on Banking Supervision [BCBS], 1994;2000;Boussanni, Desrochers, & Préfontaine, 2007;Woods, Dowd, & Humphrey, 2004). We compared ERM disclosure before and after the crisis using ANOVA. Multivariate analysis was used to find out the determinants of ERM disclosure.
Our main findings show that the crisis had a significant effect on the volume and the quality of ERM disclosure of the largest US banks. Additionally, the regression analysis shows that the volume and the quality of ERM disclosure are significantly and positively associated with the crisis, the size of banks, board independence, and duality. It is negatively and significantly associated with profitability, leverage, and board size. This paper is organized as follows. Section 2 contains a review of disclosure theories and previous studies on ERM disclosure. In Section 3, we develop our hypotheses. In Section 4, we develop our research methodology. In Section 5, we present the results of the univariate and multivariate analyses and finally in Section 6, we conclude by discussing our main findings.

Review of Previous Research and Theoretical Background
Research on risk management disclosure has evolved since the publication of the second Basel Accord and its pillar 3 which lays out a set of disclosure requirements aiming at enhancing market discipline by allowing outsiders to assess the risk management process of the bank and its exposure to risks, along with the Sarbanes-Oxley Act (SOX) of 2002, which aims at improving the quality of financial reporting after a long line of scandals the financial world underwent in the 1990s and the early 2000s (AIG Assurance, Xerox, Enron, WorldCom, Tyco).
A number of these studies aimed at assessing the nature, quantity, and quality of risk disclosures and how this information is disclosed in annual reports focusing on the management discussion and analysis section.
Some studies Abraham & Shrives, 2014;Lajili & Zéghal, 2005) show shortcomings and a lack of transparency in risk disclosure due to the absence of standards and uniform measures for different risk components. For example, after investigating risk disclosures in a sample of TSE 300 Canadian companies, Lajili and Zéghal (2005) questioned the usefulness of such risk disclosures since they lack uniformity, clarity, and quantification.
Studies that investigated the nature of risk disclosure have reported that the disclosures are qualitative with a gap in disclosing forward-looking information (Beretta & Bozzolan, 2004;Dobler et al., 2011;Ntim et al., 2013).
Other studies investigated the factors that affect ERM disclosure when corporate specific characteristics such as company size, leverage, industry, profitability, and company risk levels are taken into account. Some researchers found that ERM disclosure is significantly associated with company size Abraham & Cox, 2007). Dobler et al. (2011) found that risk disclosure is positively associated with the risk measures of American and Canadian companies, and negatively associated with the risk measures of German companies while  found no relation between risk disclosure and measures of firm risk levels.
Other studies have focused on other attributes of corporate governance to explain the practice of voluntary disclosure (Abraham & Cox, 2007;Lajili, 2009). These studies suggested that firms with effective systems and processes of corporate governance are more likely to disclose discretionary information. The main findings of these studies are that the level of risk disclosure is associated with the percentage of independent directors, with leadership structure, institutional ownership, block ownership, and board size.
Under agency theory, managers will have incentives to put their self-interest above shareholders' interests and investors may be unaware of the lack of reliability of the information the managers reveal to them about the business, and in particular, about the risks it incurs and the risk management strategy implemented. This leads to an information asymmetry problem which can be reduced by a reliable and effective risk disclosure.
Signaling theory is also a good explanatory theory for risk disclosure practices. Many studies suggest that risk-related disclosure is used by companies to signal the quality and strength of their risk management processes, and their ability to identify, assess, and manage risk. An improved level of risk disclosure allows them to distinguish themselves from other companies with less effective risk management processes (Ntim et al., 2013;Abraham & Shrives, 2014).
On the other hand,  attempted to explain the risk disclosure practices of companies with lower levels of risk. Under signaling theory, they suggested that these companies might want to explain their level of risk through their superior risk management abilities and improved risk disclosure.
The assumption of litigation costs applies also perfectly to the publication of information on risk especially for the banking sector, since this sector is highly regulated and should meet the requirements of micro-prudential regulation with regards to risk management and disclosure.
Finally, legitimacy theory explains ERM disclosure practices insofar as banks are struggling to protect their image so as not to compromise further their reputation as a result of the financial crisis.
As previously discussed, most studies have investigated risk disclosure practices and the factors affecting them by using data from only one year and carrying out one year cross-sectional studies. Very few studies have investigated the practice of ERM disclosure over time using a longitudinal analysis, and especially in the period during and after the 2007/2008 global financial crisis (Ntim et al., 2013;Maingot et al., 2012;.
Seeking to fill these gaps in the literature, this paper examines the effect of the crisis on ERM disclosure regarding the volume and the quality of risk-related information in the annual reports of top US banks.

Research Objective and Hypotheses to be Tested
This paper aims at examining the effect of the crisis on ERM disclosures in the annual reports of companies from the US banking sector during the period of the financial crisis from 2006 to 2009 and finding out its determinants.

The Effect of the Crisis on ERM Disclosure
The crisis increased information asymmetry between companies and investors. To reduce this information asymmetry and restore the confidence of investors, banks have an incentive to issue more voluntary information after the crisis on their risks and risk management practices. Signaling theory supports this hypothesis. Indeed, banks would be expected to publish more voluntary information including ERM following the crisis in order to enhance their reputation and show a positive image regarding their ability to manage their risks in tough periods.
Although there is not much research that directly explored the effect of the crisis on ERM disclosure by banks, some studies provide evidence on the existence of a positive effect of the crisis on ERM disclosures. Leitner-Hanetseder (2012) investigated the quality of risk information published in the annual reports of publicly traded German and Austrian companies, using a quality index. She found that the quality of risk information increases over time. Malafronte, Porzio, and Starita (2014) have examined the effect of the crisis on risk disclosure practices in insurance companies. They found that the level of risk disclosure is significantly affected by the crisis, and argued that insurance companies produce more information about the risks in times of crisis. They highlighted the importance of maintaining market confidence by relevant risk disclosure. Maingot et al. (2012) suggested that the crisis had no major impact on the disclosure of non-financial risks in Canadian companies.
Regarding the banks, they have strong incentives to increase their levels of disclosure. These incentives are tied to the desire to avoid agency costs, litigation costs, to reduce information asymmetry, and to benefit from the opportunity of a lower cost of capital with better access to liquidity markets, especially in times of economic downturn and increased uncertainty. Therefore, it is expected that the volume and the quality of ERM information will have increased after the financial crisis. Thus, we design the following hypothesis: H1: The volume and the quality of ERM disclosure by US largest banks have increased after the 2007-2008 financial crisis.

The Determinants of ERM Disclosure
First, we are going to investigate the relation between ERM disclosure and the banking characteristics, namely, size, profitability, and the leverage level.
It has long been proven that company size is positively and significantly associated with voluntary disclosure. This is supported by legitimacy and agency theories. Bigger companies are submitted to greater political attention and more public visibility which puts them under pressure and makes them disclose more information, especially the type of information that investors and the public are interested in, such as risks and risk management information. Besides, big companies are followed by financial analysts who will require more information disclosure. In this case, companies are pushed to disclose more about their risk in order to respect the requirements of these analysts (Healy & Palepu, 2001). This is confirmed by academic studies which find a positive and significant association between risk disclosure and the size of companies (e.g., see Beretta & Bozzolan, 2004;Abraham & Cox, 2007).
Thus, we expected to see a positive and significant relation between the size of a bank and its ERM disclosure: H2: The volume and the quality of both voluntary and aggregated ERM disclosures by US largest banks are positively associated with bank size.
Our third hypothesis treats the relation between ERM disclosure and leverage. High leveraged firms face higher cost of capital as demonstrated by Gebhardt, Lee, and Swaminathan (2001). In order to reduce the risk premium related to debt and hence to reduce the cost of capital, managers will be motivated to disclose more information about their risks. Based on a political costs hypothesis, Helbok and Wagner (2006) concluded that high leveraged banks raise their level of disclosure to avoid political costs. We then expect leverage to have a positive effect on ERM disclosure. Thus, we put forward the following hypothesis: H3: The volume and the quality of both voluntary and aggregated ERM disclosures by US largest banks are positively associated with the level of leverage.
Profitability is an indicator of how well management is using the company's assets (and/or equity) in order to realize benefits. Hence, when the profitability ratio (return on asset, or return on equity) is high, this reflects a good performance, which would prevent banks from disclosing more about their risks. Helbok and Wagner (2006) stated that when the results of a company are positive, there is no need to invest in more disclosure. On the other hand, when profitability is weak, ERM disclosure is a way to reassure stakeholders. Empirical studies found a negative relation between ERM disclosure and performance measures (Malafronte et al., 2014). Thus, we make the following hypothesis: H4: The volume and the quality of both voluntary and aggregated ERM disclosures by US largest banks are negatively associated with profitability.
The following group of hypotheses investigates the linkages between ERM disclosure and corporate governance characteristics.
Under signaling theory, managers are encouraged to disclose more information in order to provide assurance for external shareholders that they are acting in their best interest. This permits also a reduction in information asymmetry between shareholders and managers, especially when there is a high proportion of outside shareholders. Chau and Gray (2002) found a positive relation between voluntary disclosure and outside shareholders.
The duality between the role of chief executive officer (CEO) and chairman of the board is another factor that can explain banks' risk disclosure practices. When the CEO exercises the role of the chairman of the board, he will profit from his position to deliberately retain private corporate information (as suggested by agency theory). Thus, when there is duality between the role of CEO and chairman of the board, the level of ERM disclosure is low (Gul & Leung, 2004).
In the same context, board independence is a factor that can affect banks' risk disclosure practices. The role of the board of directors is mainly centered in monitoring the manager's actions. Agency theory stipulates that when the members of the board are executive members, they will not have incentives to voluntarily disclose their private information to shareholders. On the other hand, when there is a high proportion of non-executive directors in the board, they will exercise pressure on management in order to provide comprehensive and reliable disclosure especially when it comes to disclosing ERM information. Previous studies provide evidence of a positive relation between board independence and voluntary disclosures (Abraham & Cox, 2007;Lajili, 2009).
Finally, we investigated the relation between the size of the board of directors and the level of ERM disclosure. When the board of directors is small, its effectiveness will be increased since it is more cohesive and more conducive to decision-making and manager oversight (Huther, 1997). Besides, it is easier for the company to arrange board meetings for a small sized board. Previous studies support the assumption of the negative relation between board size and the level of voluntary disclosure (Jensen, 1993).
Considering the theoretical and recent empirical evidence, we formulate the following hypotheses treating the attributes of corporate governance and their relation to ERM disclosure:

Research Methodology Sample Selection and Period of Investigation
This study will be based on the 100 largest 2 banks for the year 2010 according to the Federal Deposit Insurance Corporation (FDIC). The FDIC classification is made according to the criterion of the "total amount of deposits". The main source of data in our study is the annual report on the form 10-K for the years 2006, 2007, 2008, and 2009. These years have been chosen in order to cover the closest period surrounding the financial crisis that occurred in 2008 (Schroeder & Schauer, 2010) and include the period around the adoption of Statement of Financial Accounting Standards (SFAS) 157 and 159, Basel 2, and International Financial Reporting Standards (IFRS) 7 all of which came into effect in 2007. Some studies have covered such period to investigate the effect of the crisis on disclosure practices such as Magnan, Menini, and Parbonetti (2015). Annual reports have been downloaded from the websites of banks and the EDGAR database on the website of the American Stock Exchange (SEC). We eliminated cross-listed banks since risk disclosure may be influenced by their home country regulation, which reduced our sample to 83 banks. The financial crisis caused many banks to merge or to be acquired by other institutions (including two banks from our sample). A number of banks' branches have been eliminated in order to leave only the annual reports of the parent company (11 banks). Furthermore, we dropped nine banks with no available data. Finally, we eliminated two banks that belong to a non-financial parent company. Our final sample consists of 59 of the biggest US banks. Table 1 summarizes our sample selection process.
Thus, we conduct an empirical study on the basis of public information disclosed in the annual report (from December 31, 2006 to December 31, 2009) of a sample of 59 American banks. The number of observations amounts to 236 10-K annual reports forms. Table 2 presents the descriptive statistics of the financial characteristics of our bank sample for the four years of the study. It shows that total assets, total liabilities, equities, and deposits increased after the crisis, while net income and market capitalization decreased. We conclude that the crisis has significantly affected the financial characteristics of the banks. Table 2 Financial Characteristics of the Banks in the Sample for the Years 2006Years , 2007Years , 2008Years , and 2009

Coding of ERM Information
To analyze risk disclosure, we used the content analysis approach largely used in previous accounting studies (Beretta & Bozzolan, 2004;Maingot et al., 2012;Lajili & Zéghal, 2005) that examine qualitative information. Lajili and Zéghal (2005) stated that risk disclosure is largely and qualitatively disclosed (especially non-financial risks) and that content analysis is useful to apprehend the levels of such disclosure.
In order to measure the volume of ERM disclosure, we first used the number of sentences that contain information about risks and risk management (Beretta & Bozzolan, 2004;. We then examined three sections in the annual reports: Item 1A Risk Factors, Management Discussion and Analysis (MD&A) and finally, the Notes to the Financial Statement.
The study of the content of ERM disclosure provided in the "Risk Factors" section "is important to regulators, investors and academic researchers as these disclosures represent 11.0 percent of the overall Form 10-K" (Campbell, Chen, Dhaliwal, Lu, & Steele, 2014, p. 397).
The MD&A section is the most important part that contains risk disclosure and many companies choose to make disclosures about their risk in this section. As noted in FR 67: "MD&A also provides a unique opportunity for management to provide investors with an understanding of its view of the, …, important trends and risks that have shaped the past or are reasonably likely to shape the future" 3 .
Many studies have focused on the MD&A when analyzing ERM disclosure (Beretta & Bozzolan, 2004;Lajili & Zéghal, 2005). Finally, ERM disclosure can be found in the notes to financial statement. According to Fortin and Berthelot (2012), the disclosure of information about credit risk, interest rate, and exchange rate risks is required in the notes to financial statements.
According to Linsley and Shrives (2006, p. 388), a sentence contains risk information if we are informed of "any opportunity or prospect, or of any hazard, danger, harm, threat, or exposure, that had already impacted/or may impact upon the company, as well as the management of any such opportunity, prospect, hazard, danger, harm, threat or exposure".
We used the natural logarithm for the number of sentences to measure the volume of risk disclosure in order to minimize the effect of outliers for this variable.

Index Construction
In order to improve the robustness of our results and following the study of Ntim et al. (2013) who used both quantitative proxy (sentence count) and qualitative proxy (corporate risk disclosure index), we use a self-constructed index to measure three different levels of risk disclosures (aggregated, voluntary, and mandatory).
Our index contains 91 items (see Appendix A) from research literature and Basel Accord recommendations and even encompasses further items in order to present a comprehensive scoring model useful for the assessment of ERM disclosure in the banking sector.
We used our index to measure the quality and the volume of ERM for each risk disclosure level. To differentiate between voluntary and mandatory risk disclosures, we conducted an analysis of financial accounting regulation and Security Exchange Commissions (SEC) recommendations as well as BCBS recommendations, IFRS, and SFAS regulations.
We separated our index accordingly into 48 mandatory risk disclosure items and 43 voluntary risk disclosure items. The volume of aggregated risk disclosure is measured using an unweighted index: where S i = The code attributed to each item which takes 1 if the item is disclosed and 0 if otherwise, n = The total number of items in the index, and 91 is the maximum unweighted score for all the items in the index.
We measured the quality of aggregated ERM disclosure using a weighted index: where S i = The code attributed to each item which takes 1 if the item is disclosed in general statement, 2 if the item is disclosed in a specific statement, 3 if the item is disclosed in a specific statement containing quantitative and qualitative details, and 0 if otherwise, n = The total number of items in the index, and 273 is the maximum weighted disclosure score for all the items in the index.
The volume of voluntary risk disclosure index is measured by: where S i = The code attributed to each item which takes 1 if the item is disclosed and 0 if otherwise, n = The total number of items in the index, and 43 is the maximum unweighted score for all the items in the voluntary disclosure index.
The quality of voluntary risk disclosure index is measured by: where S i = The code attributed to each item which takes 1 if the item is disclosed in general statement, 2 if the item is disclosed in a specific statement, 3 if the item is disclosed in a specific statement containing quantitative and qualitative details, and 0 if otherwise, n = The total number of items in the index, and 129 is the maximum weighted disclosure score for all the items in the voluntary disclosure index. While the volume of mandatory risk disclosure index is measured by: where S i = The code attributed to each item which takes 1 if the item is disclosed and 0 if otherwise, n = The total number of items in the index, and 48 is the maximum unweighted score for all the items in the mandatory disclosure index.
In addition, the quality of mandatory risk disclosure index is measured by: where S i = The code attributed to each item which takes 1 if the item is disclosed in general statement, 2 if the item is disclosed in a specific statement, 3 if the item is disclosed in a specific statement containing quantitative and qualitative details, and 0 if otherwise, n = The total number of items in the index, and 144 is the maximum weighted disclosure score for all the items in the mandatory disclosure index.
In order to test the reliability of our risk disclosure index, we use Cronbach's alpha. For all the years of our study, alpha was higher than the generally accepted measure of 0.7 (0.885 in 2006, 0.895 in 2007, 0.905 in 2008, and 0.908 in 2009) indicating that our self-constructed index is reliable. Table 3 provides details for the measurement and sources of independent variables. In order to find the determinants of the volume and the quality of ERM disclosure, we have developed five models as follows:

Explanatory Variables Measurement
Model 1:

Analysis of the Volume and the Quality of ERM Disclosure and Verification of the Effects of the Crisis Descriptive Statistics for the Volume and the Quality of ERM Disclosure
In this section, we examine how and where US banks disclose relevant information about ERM. We measure the volume of risk disclosure by the number of sentences used in each firm's disclosure, either in Item 1A, the MD&A or footnote sections, following the content analysis approach (see Table 4).
This table shows that the mean of the volume of ERM disclosure increased after the crisis. Before the crisis, the means of DISV were 302.   We also conclude that ERM information is mainly disclosed in the MD&A section followed by the risk factor section and, to a lesser extent, in the footnotes.
Panel B shows that, the quality and the volume of voluntary ERM disclosure have increased through the four years of investigation ( and 2009 respectively. These results suggest that the crisis has affected the volume and the quality of the ERM disclosure in the annual report of the top US banks supporting our first hypothesis.

Test for the Hypotheses Concerning the Effect of the Crisis on the Volume and the Quality of ERM Disclosure
To further investigate the effect of the crisis on the volume and the quality of ERM disclosure, we conducted an ANOVA analysis for the seven measures of ERM disclosure after gathering the data from the four years of the study. DISV, VOLDISI, VOLDISQ, MANDISI, MANDISQ, DISI, and DISQ constitute the dependent list of variables and CRISIS is the independent factor affecting these variables.
The alternative hypothesis: More specifically: H 1 : DISV 1 > DISV 0 ; VOLDISI 1 > VOLDISI 0 ; VOLDISQ 1 > VOLDISQ 0 ; MANDISI 1 > MANDISI 0 ; MANDISQ 1 > MANDISQ 0 ; DISI 1 > DISI 0 ; DISQ 1 > DISQ 0 , in which the crisis has a positive effect on the volume and the quality of both mandatory and voluntary ERM disclosures.  The results of the analysis of variance are reported in Table 5. The means of DISV, VOLDISI, VOLDISQ, MANDISI, MANDISQ, DISI, and DISQ for the period before and after the crisis and the related F statistics are summarized in the last three columns. The F values of the volume of risk disclosure measured by the number of sentences and for the volume and the quality of aggregated, voluntary, and mandatory ERM disclosure are highly significant. Thus, the effect of the crisis on ERM disclosure is significant and the null hypothesis is rejected. On the other hand, the means of DISV, VOLDISI, VOLDISQ, MANDISI, MANDISQ, DISI, and DISQ have increased after the crisis which means that the crisis has a positive and significant effect on ERM disclosure volume and quality which is consistent with our first hypothesis.

Multivariate Analysis for the Effect of the Crisis on ERM Disclosure and Its Determinants
In this section, we analyze the determinants of ERM disclosure during the financial crisis. The descriptive statistics for these variables are presented in Table 6. This table shows no changes in the variables SIZE and DEBT as well as in the corporate governance variables. However, the variable ROA decreased from 0.012 before the crisis to 0.001 after the crisis. The results of the Pearson correlation. Table 7 presents the Pearson correlation coefficients between all the variables of our study and their statistical significance. The Pearson correlation shows that the crisis is significantly (p < 0.05) and positively correlated with the volume and the quality of ERM disclosure.
Thus, H1 which predicted a positive effect of the crisis on ERM disclosure is fully supported. H2 (positive effect of the bank size), H3 (positive effect of the leverage), H4 (negative effect of the profitability), and H5c (positive effect of the board independence) are supported by the correlation matrix. Nevertheless, the association is only significant for SIZE, ROA, and BINDEPENDENT. Note. ** : Correlation is significant at the 0.01 level (2-tailed); * : Correlation is significant at the 0.05 level (2-tailed).
The results of the regression analysis. Before proceeding to the regression between the volume and the quality of the disclosure of information on the ERM and the variables related to the characteristics of the banks and the corporate governance attributes, we measure the variance inflation factor (VIF) in order to detect if there is a multicollinearity problem between the independent variables. In our study, the VIF is lower than 2 for all the variables which means that there is no multicollinearity between variables (Myers, 1990). Table 8 presents the results of the regression analysis. This table shows that the crisis has a significant and positive effect on ERM levels of disclosure as measured by LN_DISV (p = 0.000) as well as in the quality of voluntary and aggregate ERM disclosure as measured by VOLDISQ and DISQ (p = 0.003 and 0.002 respectively). Nevertheless, this effect is not significant on the volume of voluntary and aggregate ERM disclosure measured by VOLDISI and DISI. This means that the crisis has affected the quality but not the volume of ERM disclosure. Indeed, the variable LN_DISV is measured by the number of sentences containing information about ERM. The effect of the crisis on this does not distinguish between the quality and volume of ERM disclosure since the increase in the number of sentences may mean improving the quality of the information that contains more detailed quantitative and qualitative information about the various risks and ERM disclosed. By measuring separately the volume (DISI) and the quality (DISQ) of ERM disclosure, we note that the crisis has affected the quality of risk disclosure but not the volume. The quality of risk disclosure is measured using the same list of items that is used for the volume and the crisis affected the way these items are disclosed and proved that the same categories of risk information are disclosed with more specific details. With regards to the determinants of the ERM disclosure, the results of the regression analysis show a positive and significant relation between SIZE and ERM disclosure (p = 0.000) for all the proxies of ERM disclosure which is consistent with our H2 and previous research (Beretta & Bozzolan, 2004;Dobler et al., 2011;Abraham & Cox, 2007). Results concerning DEBT are inconclusive. We found that the relation between debt and risk disclosure is only significant when the regression is conducted for LN_DISV (Model 1) which refutes our hypothesis H3 that "The volume and the quality of both voluntary and aggregated ERM disclosures by US largest banks are positively associated with the level of leverage". This result is consistent with Eng and Mak (2003), but inconsistent with most of prior research investigating the determinants of voluntary disclosure (Gebhardt et al., 2001;Helbok & Wagner, 2006) and enunciates that high leveraged banks disclose less ERM information during the financial crisis. This finding suggests that high leveraged banks do not want to incur further expenses related to the disclosure of more information about their risks.
The negative and significant relation between the profitability ratio and the level of ERM disclosure measured by "LN_DISV" confirms our hypothesis H4.
Duality is positively and significantly associated with the quality of ERM voluntary disclosure and the volume and quality of aggregated risk disclosure (Models 2b and 3a-b). This finding is not consistent with our hypothesis H5b. It seems that when the CEO exercises the role of the chairman of the board, banks disclose more ERM information since he is responsible for disclosing all relevant information especially about risks in order to avoid litigation costs and potential lawsuits against him.
As envisaged in our hypothesis H5c, the regression shows that the volume and the quality of ERM disclosure are positively and significantly associated with the board independence (Models 2a-b and 3a-b). This finding is consistent with previous studies (Abraham & Cox, 2007;Lajili, 2009). Finally, the board size is negatively and significantly associated with the quality of ERM voluntary disclosure (Model 2b). This is consistent with our H5d and previous studies (Jensen, 1993).  DISQ: Disclosure quality = ∑ (with S i = The code attributed to each item which takes 1 if the item is disclosed in a general statement, 2 if the item is disclosed in a specific statement, 3 if the item is disclosed in a specific statement containing quantitative and qualitative details, and 0 if otherwise, and n = The total number of items in the index); CRISIS: Dummy variable which takes 1 for the period after the crisis and 0 for the period before the crisis; SIZE: Natural logarithm of total asset; DEBT: Total liability/total asset; ROA: Return to asset ratio; OUTSHARE: Proportion of shares held by outside shareholders to total number of shares; DUAL: Dummy variable which takes 1 if the chairman assumes the role of CEO and 0 if otherwise; BINDEPENDENT: The proportion of independent non-executive directors to the total number of directors; BSIZE: The number of the board members.

Conclusion
This research provides evidence regarding the impact of the crisis on the volume and the quality of ERM disclosure in the largest US banks. We first calculated the volume and the quality of voluntary, mandatory, and aggregated ERM disclosure using a self-constructed index, and then compared the scores using an ANOVA analysis to detect the effect of the crisis. Second, we used a multivariate analysis incorporating the variable crisis among the factors affecting the practice of risk disclosure.
The crisis has a positive and significant effect on the quality of voluntary and aggregated risk disclosure. Our research sheds new lights on the importance of improving the quality of ERM disclosure especially in times of crisis. Many factors have contributed to the increase in the level of ERM disclosure. Banks may have wanted to signal their success in overcoming the threat of bankruptcy after the financial meltdown, and gave more importance to the disclosure of their ERM information. Besides, the number of risks increased after the financial crisis which led banks to voluntarily disclose more information to explain the actions they are taking in order to mitigate those risks, and to reassure investors and depositors that they are out of danger so as to restore public trust.
Further, litigation costs can explain the reason why banks are making public the information about the dramatic situation they are facing. The financial crisis created a debate about who to blame and regulators were pointing fingers at banks and looking for answers in their annual reports.
Critical factors affecting ERM disclosure in a crisis context have been analyzed. We found that banks' size has a positive and significant association with ERM disclosure. The size of the banks can be considered as a proof of political visibility which could push the managers to increase their voluntary risk disclosure strategy to avoid political and litigation costs. Contrary to previous studies and our expectations, we found a negative and significant association between leverage and ERM disclosure during the period of the crisis when ERM disclosure is calculated by the natural logarithm of the number of sentences containing ERM information. This finding is consistent with the study of Eng and Mak (2003) and demonstrates that in period of crisis, low leveraged banks disclose more information about their risks. Banks might want to signal their capital structure characterized by a low leverage ratio in order to decrease their cost of capital and have better access to funds.
Profitability is another determinant of risk disclosure. We found that a high level of profitability ratio as measured by ROA is negatively and significantly associated with the level of risk disclosure. Banks with high performance do not feel the need to invest in more ERM disclosure (Helbok & Wagner, 2006).
Finally, we found a positive (negative) and significant relationship between the volume and quality of ERM disclosure and duality as well as independent members of the board of director (board size) which supports our expectations and previous studies (Abraham & Cox, 2007;Lajili, 2009).
Our research has implications for regulators and standards setters by highlighting the importance of disclosing all reliable information about risks during the financial crisis. Regulatory responses and measures taken to mitigate risks and assure financial stability are always lagging behind the fast growth of financial innovation. Accordingly, solutions for crises should be taken ex-ante through prediction models and an improvement of the quality of financial reporting related to ERM and especially to financial instruments in order to allow investors and financial analysts to better assess banks' risks and take appropriate actions in a timely manner, rather than through an ex-post new set of rules. We also contributed to the literature by providing a comprehensive index to measure the volume and the quality of ERM disclosure by gathering a list of items based on the recommendations of the Basel report and a review of previous research and adapting them to risk management disclosure in a banking context. Thus, it would be interesting for future studies to use this index to an extended sample of banks from different countries to see if the crisis has affected risk disclosures in their annual reports and if the same relations will be found between ERM disclosure and banks' characteristics and corporate governance attributes.
The common scale used to measure the weighted index of the most of the items, except for the three first items of the first category and the entire second category containing the qualitative characteristics of the information (presented in Table A1 below), is the following: 0: The item is not disclosed; 1: The item is disclosed in a general statement; 2: The item is disclosed in a specific statement; 3: The item is disclosed in a specific statement containing quantitative and qualitative details.

Table A1
Coding Sheet Used to Measure the Index of Quality of the ERM Disclosures With the Measurement Scales

Item
Code Mandatory/voluntary General items about overall risk 1. Is the risk report disclosed in a self-contained section in the three locations in the annual report (risk report, MD&A, and notes to financial statement) and is the risk report marked by a headline and table of content? 0: Risk report is not in a self-contained section 1: Risk report is in a self-contained section but not marked by a headline 2: Not all locations in the annual report contain a risk report marked by a headline 3: Risk report is in a self-contained section marked by a headline in all locations of the annual report Voluntary 2. Are risks separated into adequate categories and types? 0: Risks are not separated into adequate categories and types 1: Categories of risk are disclosed in a general statement 2: Categories of risk are disclosed in a specific statement 3: Categories of risk are disclosed in a specific statement containing quantitative and qualitative details Voluntary 3. Does the risk report include a definition of risk and risk management? Voluntary (Table A1 continued  Voluntary 49. Does the risk report include a definition of liquidity risk management and its goal? Voluntary 50. Does the liquidity risk management report include information about the sources of liquidity risk? Voluntary 51. Does the liquidity risk management report information on the management, structure, and organization of its liquidity risk management function? Voluntary 52. Does the bank disclose qualitative information on its liquidity risk management and control policies and practices? Voluntary 53. Does the bank provide details on key metrics used in their analyses and on the types of stress tests they perform? Mandatory 54. Does the bank provide details on contingency planning? Mandatory 55. Does the bank provide details about the role of supervisors? Mandatory 56. Does the bank provide details on the coverage of the four origins of cash flows: assets, liabilities, off-balance-sheet activities, sources and uses of funds? Mandatory 57. Does the bank report information about cash available from the sale or maturity of assets or their use as collateral for secured borrowing (i.e., asset liquidity), including the assumptions on what prices these assets would fetch in the postulated scenario (proceeds from sale)?
Mandatory 58. Does the bank report information about funding requirements from liabilities? Mandatory (Table A1 continued