The Information Content of Risk Factor Disclosures in Quarterly Reports

Risk reporting: A review of the literature and implications for future research✩

“…However, the recent US-based research (i.e., Bao & Datta, 2014;Filzen, 2015;Hope et al, 2016;Kravet & Muslu, 2013) makes use of much larger datasets, of structured filings (i.e., 10-Ks) that are publicly available, and advances in machine-learning based techniques which make quantification-based measures more straightforward to perform. Rajgopal (1999) is among the early studies examining the informativeness of FRR No.…”

“…Using a different source and approach to quantifying risk information, Filzen (2015) examines the informativeness of risk disclosure by focusing on updates within the risk factor statements in quarterly reports, using a sample of 13,165 firm-quarters. The findings support Kravet and Muslu's (2013) divergence argument regarding informativeness.…”

“…The findings support Kravet and Muslu's (2013) divergence argument regarding informativeness. Filzen (2015) shows that risk factor updates are associated with adverse outcomes as measured by abnormal returns and negative earnings revelations.…”

Improving Financial Statement Footnotes: Evidence from Derivative and Hedging Disclosures

“…The FASB is currently re-examining certain aspects of hedge accounting, including disclosures (Burkholder, 2014 In addition to studying derivative and hedging disclosure, prior research also 7 Another stream of research studies the effects of risk-related disclosures not specific to derivatives and hedging. These papers find that risk disclosures are useful sources of information and are associated with investor perceptions of firm risk (Kravet and Muslu, 2013;Campbell et al, 2014;Bao and Datta, 2014;Hope et al, 2015;Filzen, 2015).…”

How causal focus and specificity in risk factor disclosures Jointly affect investor judgments

“…Using the keyword-based textual information analysis, the accounting literature has largely focused on the quantitative aspect of uncertainty in firms' narrative risk disclosures. For example, based on the number of uncertainty-or risk-related words such as 'uncertainty', 'uncertain', 'risk' and 'risky' in their self-constructed dictionary, prior studies find that firms with greater pre-disclosure financial, litigation and tax risks indicate greater uncertainty in the disclosures (Campbell et al 2014;Filzen 2015;Kravet and Muslu 2013). 8 They further document that firms with a greater amount of uncertainty are more likely to experience negative abnormal returns, higher stock return volatility, and market-based beta.…”