 You have been forewarned! The effects of risk management disclosures and disclosure tone on investors’ judgmentsHun-Tong Tan and Feng Yeo Accounting, Organizations and Society, 2023, vol. 105, issue C Abstract: We examine the effect of providing risk management disclosures alongside risk disclosures on investors' stock valuation judgments, and how risk disclosure tone influences this effect. In practice, risk management disclosures are mandated in some settings but not others although conceptually, disclosing both the risk and how it is managed offer investors the most holistic understanding of firm risk. We find that without risk materialization, risk management disclosures have a positive effect on judgments when the risk disclosure tone is positive. Also, investors provide lower (higher) stock valuations when a positive versus negative tone is used in the absence (presence) of risk management disclosures. However, with the negative news of risk materialization, risk management disclosures and tone no longer have an effect on investors’ judgments. Our findings have implications for managers and regulators, as investors may penalize firms that provide risk disclosures, even if these risks have been properly managed. Keywords: Risk disclosures; Disclosure tone; Disclosure regime; Risk management plans (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:aosoci:v:105:y:2023:i:c:s0361368222000678 DOI: 10.1016/j.aos.2022.101400 Access Statistics for this article Accounting, Organizations and Society is currently edited by Christopher Chapman More articles in Accounting, Organizations and Society from Elsevier |
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