IFRS 7 adoption and bank risk taking

Gerald J. LOBO, Chong WANG, Feng (Harry) WU*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review


We examine whether and how banks’ risk disclosure relates to their risk taking behavior. Effective from 2007, International Financial Reporting Standards No. 7 (IFRS 7) requires the disclosure of risk arising from financial instruments, which enhances bank risk disclosure. Using a difference-in-differences analysis, we document a significant decrease in bank risk taking following IFRS 7 adoption. This effect is more prominent when accounting rules are more strictly enforced and alternative bank risk constraining means are weak. We also find that after IFRS 7 adoption, banks are more prudent in loan offering that helps reduce risk. Overall, our results are consistent with the market discipline view of bank risk disclosure and underscore IFRS 7′s role in improving financial stability.

Original languageEnglish
Article number107225
JournalJournal of Accounting and Public Policy
Early online date7 Jun 2024
Publication statusE-pub ahead of print - 7 Jun 2024

Bibliographical note

Publisher Copyright:
© 2024 Elsevier Inc.


  • Bank risk taking
  • IFRS 7
  • Risk disclosure

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