The benefits of specific risk-factor disclosures

• Autores: Ole-Kristian Hope, Danqi Hu, Hai Lu
• Localización: Review of Accounting Studies, ISSN-e 1573-7136, Vol. 21, Nº. 4, 2016, págs. 1005-1045
• Idioma: alemán
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• Resumen

  • 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. [ABSTRACT FROM AUTHOR]