The benefits of specific risk-factor disclosures

• 成果类型: Article
• 署名作者: Hope, Ole-Kristian; Hu, Danqi; Lu, Hai
• 署名单位: University of Toronto; BI Norwegian Business School; Northwestern University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-016-9371-1
• 发表日期: 2016
• 页码: 1005-1045
• 关键词: value-at-risk; information-content; earnings announcements; price; analysts; association; management; FILINGS; FIRMS

摘要

Practitioners have long criticized risk-factor disclosures in the 10-K as generic and boilerplate. In response, regulators emphasize the importance of being specific. By using a computing algorithm, this paper establishes a new measure (Specificity) to quantify the level of specificity of firms' qualitative risk-factor disclosures. We first examine determinants of variations in Specificity, and document that firms with high proprietary costs provide less specific risk-factor disclosures. More importantly, we find that, controlling for numerous determinants, the market reaction to the 10-K filing is positively and significantly associated with Specificity. In addition, our results suggest that analysts are better able to assess fundamental risk when firms' risk-factor disclosures are more specific. Together, these findings suggest that more specific risk-factor disclosures benefit users of financial statements.