Kudzai Matiashe1, Adele Oosthuizen, Marie Janse van Rensburg
Abstract
Investors have incurred significant losses due to the failed expansion strategies of several South African companies. These failures have raised concerns about the quality of risk disclosures provided. Previous studies have primarily assessed the quality of risk disclosures in general, with limited attention given to specific, high-risk investments. This study contributes by comparing the quality of risk disclosures relating to international expansions before and after the investment showed signs of distress. A risk disclosure checklist was developed from the guidance provided in the Integrated Reporting Framework. The cases of two JSE-listed companies with’ problematic international expansions were investigated. A deductive approach to document analysis was adopted to evaluate the quality of the disclosures in the company-integrated reports. The study found that risk disclosures were generic. During the initial stages of the expansion, reporting focused primarily on the positive aspects of the investment opportunity. Only when the risks started materialising did the companies include relevant information about the adverse implications of the expansion. The study supports previous findings that companies focus on creating a positive image by downplaying or omitting negative information, thereby using risk disclosures to manage investor impressions rather than providing transparent and accurate information.