Financial instruments disclosure. A study on the value relevance of IFRS 7

This paper focuses on the relevance of financial instruments’ disclosure in the banking sector, considered as a topic of crucial importance especially after the recent financial crisis. Namely, this paper aims to test whether information required by IFRS 7 is value relevant for investors in order to support them in assigning appropriate risk levels in their investment decisions. The regulatory framework of bank’ financial risks is complex since it is formulated by a range of different bodies. Literature, however, argues for the incompleteness of such framework. This incompleteness is one of the premises for IFRS 7. The sample consists of all Italian listed banks over a 7-year period, 2007–2013. Results confirm our expectations, showing a positive association between banks’ value and the financial index disclosure.