The Information Content of Mandatory Risk Factor Disclosures in Corporate Filings

Campbell, John L.; Chen, Hsinchun; Dhaliwal, Dan S.; Lu, Hsin-Min; Steele, Logan B.

doi:10.2139/ssrn.1694279

Cited by 89 publications

(234 citation statements)

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“…Clearly, the differences in these two settings highlight the fact that it is not clear that the SEC's mandate will provide useful information to investors for firms that have historically been traded on public exchanges. Campbell et al (2011) find that the length of Risk factor sections in annual reports is negatively related to short window abnormal returns around the filing of the 10-K, and attribute this price reaction to changes in the discount factor used by investors.…”

Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 91%

“…However, Campbell et al (2011, system found limited evidence of market reactions to 10-Qs. Easton and Zmijewski (1993) find market reactions around 10-Q filings when they are likely to be the first release of earnings information; however, they find no market reaction when 10-Qs are preempted by a general earnings announcement.…”

Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 99%

“…Studies examining Risk Factors in annual reports and prospectus statements suggest that Risk Factor disclosures (at least in those contexts) may provide information about general uncertainty that might impact the discount factor used by investors (Arnold et al 2007;Deumes 2008;Campbell et al 2011 Because of the uncertainty related to the realization of a negative outcome, I…”

Section: H2mentioning

confidence: 99%

“…Two concurrent working papers that study Risk Factor disclosures in annual reports conclude that annual Risk Factor disclosures are informative to investors (Campbell, Chen, Dhaliwal, Lu, and Steele 2011;Huang 2010). However, there are a few key differences between their studies and mine.…”

Section: Introductionmentioning

confidence: 99%

“…My study effectively picks up where Huang (2010) leaves off, by focusing on whether Risk Factor updates convey useful information to investors. Second, Campbell et al (2011) generally focus on whether annual Risk Factor disclosures convey information about general uncertainty/volatility, whereas in this study I focus on whether Risk Factor updates contain information about specific uncertainty surrounding negative outcomes. Finally, it is not clear whether the findings related to disclosure in annual reports are generalizable to disclosure in quarterly reports.…”

Section: Introductionmentioning

confidence: 99%

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The Information Content of Risk Factor Disclosures in Quarterly Reports

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2014

SSRN Journal

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Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 91%

Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 99%

Section: H2mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Information Content of Risk Factor Disclosures in Quarterly Reports

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2014

SSRN Journal

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Do investors value companies' mandatory nonfinancial risk disclosure? An empirical analysis of the Italian context after the EU Directive

2020

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In October 2014, the European Union adopted Directive 2014/95/EU (hereafter, EU Directive), mandating companies of a certain size to draft and publish corporate nonfinancial information (NFI) regarding society and the environment. In this study, we examine the mandatory disclosure of nonfinancial (NF) risks by listed Italian companies, as required by the EU Directive, focusing on both the state‐of‐the‐art of such disclosure and its usefulness for investors. For this purpose, the study adopts a two‐staged research approach; in the first stage, we employed a manual meaning‐oriented content analysis to investigate the NF declarations (NFDs) of the listed Italian companies that were obliged to disclose NFI, returning a quality NF risks disclosure index. In the second stage, we used the value relevance methodology to investigate whether the disclosed NF risk information affects the levels of equity prices, through a modified Ohlson model. Our research is one of the first to investigate the value relevance of mandatory disclosures of NF risks following the implementation of the EU Directive, in the Italian context. The research was carried out in 2017, the first year of the directive's application for listed Italian companies. The main findings support a positive association between NF risk information disclosure levels and companies' market value. Moreover, they provide evidence of a significant mediating effect of NF risk on the relationship between financial risks and market value.

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Does the market value M&A risk factor disclosures? Evidence from the involvement of investment bank advisors

Xie

Wang

Schochet

2021

J Corp Accounting Finance

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This paper investigates whether the market values risk factor disclosures in the context of mergers and acquisitions (M&A) and how the involvement of top‐tier investment banks affects the association. We complement previous research on risk factor disclosures by suggesting that the inter‐organizational relationship between companies and investment banks they hired in M&A transactions affects investors’ perceptions of M&A risk factor disclosures. Specifically, we find that while M&A risk factor disclosures are positively related to the firms’ market value, the involvement of a reputable investment bank advisor negatively moderates this relationship. Our research demonstrates that M&A risk factor disclosures are informative and the investment bank advisor as an intermediary would affect investors’ perception of the acquirer's risk factor disclosures. The study provides implications for regulatory policies relating to risk disclosures, which should be of interest to regulators, investors, and managers.

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The Information Content of Mandatory Risk Factor Disclosures in Corporate Filings

Cited by 89 publications

References 10 publications

The Information Content of Risk Factor Disclosures in Quarterly Reports

The Information Content of Risk Factor Disclosures in Quarterly Reports

Do investors value companies' mandatory nonfinancial risk disclosure? An empirical analysis of the Italian context after the EU Directive

Does the market value M&A risk factor disclosures? Evidence from the involvement of investment bank advisors

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