The Information Content of Risk Factor Disclosures in Quarterly Reports
Document Type
Article
Publication Date
12-2015
DOI
http://dx.doi.org/10.2308/acch-51175
Abstract
I examine whether recently required risk factor update disclosures in quarterly reports provide investors with timely information regarding potential future negative economic events. Specifically, I examine whether risk factor updates in 10-Q filings are associated with negative abnormal returns at the time the updates are disclosed and whether quarterly updates are followed by negative earnings shocks. I find that firms presenting updates to their risk factor disclosures have significantly lower abnormal returns around the filing date of the 10-Q relative to firms without updates. I also find that firms with updates to their risk factors section have significantly lower future unexpected earnings and are more likely to experience future extreme negative earnings shocks. These findings suggest that the recent disclosure requirement mandated by the SEC was successful in generating timely disclosure of bad news.
Publication Information
Filzen, Joshua J.. (2015). "The Information Content of Risk Factor Disclosures in Quarterly Reports". Accounting Horizons, 29(4), 887-916.