The Impact of Corporate Financial Disclosure Quality on Banks’ Loan Risk Assessment: A Case Study of Uzbekistan
Keywords:
Corporate financial disclosures, credit risk assessment, emerging markets, Uzbekistan, IFRS, financial transparency, SMEs, Basel III
Abstract
Corporate financial disclosure quality plays a decisive role in banks’ loan risk assessment, particularly in emerging markets where reporting practices remain uneven. In Uzbekistan, the ongoing expansion of IFRS (International Financial Reporting Standards) and the shift toward risk-based banking supervision have increased the need for accurate, timely, and comparable borrower financial information. However, disclosure quality, especially among SMEs (Small and Medium-sized Enterprises), remains inconsistent, limiting banks’ ability to conduct cash-flow-based analysis and increasing reliance on collateral. This study examines how disclosure quality affects banks’ credit risk assessment in Uzbekistan using a conceptual mixed-method approach. Due to the scarcity of standardized borrower-level datasets and inconsistent audited reporting, econometric analysis is not feasible; instead, the study synthesizes existing empirical and regulatory evidence to identify key disclosure risk channels. Drawing on international research and Basel III requirements for data integrity, the paper shows that weak disclosures undermine reliable PD (Probability of Default) and LGD (Loss Given Default) estimation, distort risk-weighted asset calculations, and reduce the effectiveness of supervisory review and market discipline. The study concludes that improving financial reporting quality, advancing practical IFRS adoption for SMEs, and enhancing enforcement and digital data infrastructure are essential for strengthening risk assessment accuracy and reducing credit misclassification in Uzbekistan.
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References
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2. Altman, E. I., & Sabato, G. (2007). Modeling credit risk for SMEs: Evidence from the U.S. Journal of Financial Services Research, 32, 73–87.
3. Bagirov, M., Babayev, N., & Alakbarov, A. (2025). Research on the Impact of Bank Activities on Economic Dynamics: International Experience. Journal of Economic Cooperation & Development, 46(1), 131-158.
4. Barth, J. R., Caprio, G., Jr., & Levine, R. (2013). Bank regulation and supervision in 180 countries from 1999 to 2011 (SSRN Working Paper).
5. Basel Committee on Banking Supervision. (2010). Basel III: A global regulatory framework for more resilient banks and banking systems. Bank for International Settlements.
6. Basel Committee on Banking Supervision. (2017). Basel III: Finalising post-crisis reforms. Bank for International Settlements.
7. Basel Committee on Banking Supervision. (2018). Pillar 3 disclosure requirements – updated framework. Bank for International Settlements.
8. Blundell-Wignall, A., & Atkinson, P. (2010). Thinking beyond Basel III: Necessary solutions for capital and liquidity. OECD Journal: Financial Market Trends, 2010(1), 1–24.
9. Bowen, G. A. (2009). Document analysis as a qualitative research method. Qualitative Research Journal, 9(2), 27–40.
10. Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77–101.
11. Burkhanov, S. (2023). The relationship between corporate lending and economic growth: evidence from Uzbekistan (Doctoral dissertation, National Graduate Institute for Policy Studies, Tokyo, Japan).
12. Claessens, S., & Tzioumis, K. (2006). Measuring firms’ access to finance. World Bank, 2006, 1-25.
13. Creswell, J. W., & Plano Clark, V. L. (2018). Designing and conducting mixed methods research (3rd ed.). SAGE.
14. Cull, R., & Martinez Peria, M. S. (2010). Foreign bank participation in developing countries: What do we know about the drivers and consequences of this phenomenon? World Bank policy research working paper, (5398).
15. Denzin, N. K. (2012). Triangulation 2.0. Journal/Publisher as in original citation.
16. Flick, U. (2014). An introduction to qualitative research (5th ed.). SAGE.
17. Gidage, M., Gyamfi, B. a., & Asongu, S. a. (2025). Environmental Reporting and Financial Performance: Evidence from the Banking Sector in BRICS Countries. Business Strategy and the Environment.
18. Gordy, M. B. (2003). A risk-factor model foundation for ratings-based capital rules. Journal of Financial Intermediation, 12(3), 199–232.
19. Government of Uzbekistan, Ministry of Economy and Finance. (2024). Important priorities for the accounting system and its improvement [Press release/news].
20. Hamkorbank. (n.d.). Credits for business. Retrieved November 23, 2025, from https://hamkorbank.uz/business/credits-for-business/.
21. IFRS Foundation. (2024). Jurisdiction profile: Uzbekistan. IFRS Foundation.
22. Kadirovich, R. N., & Rabbimovich, K. K. (2021). Methodology of transformation of financial reporting to international standards in Uzbekistan (evidence from commercial banks). International Journal of Marketing and Technology, 11(10), 1-26.
23. Khamdamov, S. J., Makhmudov, S., Kamilova, I., Mirhaydarova, M., Karshiev, D., Akbarov, K., & Eshboyev, M. (2024, December). Improving the Efficiency of Credit Decisions Using Digitalization in Commercial Banks. In Proceedings of the 8th International Conference on Future Networks & Distributed Systems (pp. 90-96).
24. Khasanovich, M. M. (2025). Improving the Risk Management System of Commercial Banks of Uzbekistan. GlobalBiz Summit: Business and Economic Strategies for the Future, 1, 58-64.
25. Khushnud, Z., & Qingjie, Z. (2020). Study on Banks’ Risk Assessment of Financing Small Medium Enterprises’ Project: The findings and experience from Uzbekistan Banking Sectors. International Journal of Business and Administrative Studies, 6(2), 86.
26. Kim, O. (2025). The Impact of Mandatory IFRS Reporting Requirement on Accounting Quality of Public and Private Companies in Kazakhstan. The International Journal of Accounting, 2543004.
27. Klichev, B. P., & Choriev, I. X. (2021). The issues of business activity organization in Uzbekistan. Turkish Online Journal of Qualitative Inquiry (TOJQI), 12(7), 4587-4593.
28. Kurtbedinov, E. (2009). Corporate Governance in Transition Economies: Comparative Analysis of Russia, Kazakhstan and Uzbekistan. Cuvillier Verlag.
29. Mamadiyarov, Z. T., Sultanova, N. I., Khamdamov, S. J. R., & Makhmudov, S. B. (2024). Analyzing the impact of International Financial Reporting Standards (IFRS) on microfinance services. In Development of International Entrepreneurship Based on Corporate Accounting and Reporting According to IFRS: Part a (pp. 39-47). Emerald Publishing Limited.
30. Miles, M. B., Huberman, A. M., & Saldaña, J. (2014). Qualitative data analysis: A methods sourcebook (3rd ed.). SAGE.
31. Muhabbat, H., & Jakhongir, S. (2024). Harmonization of international valuation standards and international financial reporting standards. ASEAN Journal of Economic and Economic Education, 3(2), 143-164.
32. Nicolò, A., & Pelizzon, L. (2008). Credit derivatives, capital requirements and opaque OTC markets. Journal of Financial Intermediation, 17(4), 444–463.
33. Nurunnabi, M. (2017). Auditors’ perceptions of the implementation of International Financial Reporting Standards (IFRS) in a developing country. Journal of Accounting in Emerging Economies, 7(1), 108-133.
34. Patton, M. Q. (2015). Qualitative research & evaluation methods (4th ed.). SAGE.
35. PwC Uzbekistan. (2024). Uzbekistan: Public interest entities to apply IFRS from 1 January 2026. PricewaterhouseCoopers.
36. Riederer, S. (2024). Republic of Uzbekistan: Macro stress testing of the Uzbek banking sector (IMF Technical Assistance Report No. 25/32). International Monetary Fund, Monetary and Capital Markets Department.
37. Tadjibaeva, D. (2019). Small and medium-sized enterprise finance in Uzbekistan: challenges and opportunities.
38. WORK, G. Q. (2024). REPUBLIC OF UZBEKISTAN. Diss. MINISTRY OF HIGHER EDUCATION.
39. Zulfiya, I. Theoretical Foundations of Uzbekistan's Flexibility to International Financial and Economic Ratings. World Economics and Finance Bulletin, 31, 105-112.
Published
2025-12-31
How to Cite
Akhmedov, B. (2025). The Impact of Corporate Financial Disclosure Quality on Banks’ Loan Risk Assessment: A Case Study of Uzbekistan. European Scientific Journal, ESJ, 21(34), 70. https://doi.org/10.19044/esj.2025.v21n34p70
Section
ESJ Social Sciences
Copyright (c) 2025 Behruz Akhmedov
This work is licensed under a Creative Commons Attribution 4.0 International License.
