Market Capitalization, Corporate Governance Mechanisms and Emerging Risk Disclosure: Evidence from European Listed Companies

In the contemporary global context, emerging risks are characterized by a high degree of interconnectedness and rapid evolution, requiring companies to develop proactive governance and risk management mechanisms to address stakeholders’ expectations within a sustainability-oriented framework. This study investigates the associations of market capitalization, corporate governance mechanisms, and financial characteristics on the level of emerging risk disclosure in annual reports. Market capitalization is employed as a market-based indicator associated with investors’ aggregate perceptions of the firm, rather than as a direct or comprehensive measure of corporate reputation. The empirical analysis is based on a sample of 528 European companies, using data extracted from the London Stock Exchange Group (LSEG) Workspace database for 2024. To construct firm-level risk profiles, a manual content analysis approach was employed, focusing on the extent of disclosure related to the ten most relevant emerging risks identified by the Risk Leadership Network. These risks were subsequently classified, in accordance with the OECD framework, into three strategic pillars: Technology, Geopolitics and Economy, and Climate. By applying this research methodology, the study highlights the multidimensional nature of emerging risk disclosure, indicating that its relationship with market, corporate governance, and financial factors varies according to the nature of the risk examined. Market capitalization is significantly associated with climate risk disclosure, while corporate governance mechanisms and financial characteristics contribute differently to explaining the other dimensions of emerging risk disclosure.