Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/59317

Are Lengthy and Boilerplate Risk Factor Disclosures Inadequate? An Examination of Judicial and Regulatory Assessments of Risk Factor Language

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Title:Are Lengthy and Boilerplate Risk Factor Disclosures Inadequate? An Examination of Judicial and Regulatory Assessments of Risk Factor Language
Authors:Cazier, Richard A.
McMullin, Jeff
Treu, John Spencer
Keywords:risk disclosure
boilerplate
litigation risk
securities lawsuits
SEC comment letters
show 1 moredisclosure regulation
show less
Date Issued:30 Aug 2018
Abstract:Prior research finds that lengthy and boilerplate risk factor disclosures are associated with negative capital market consequences. Yet regulators and users of financial statements continue to criticize corporate risk factor disclosures as excessively long and boilerplate. We investigate two potential sources of firms’ incentives to issue lengthy, boilerplate risk factor disclosures by examining how judicial and regulatory assessments of firms’ risk factor disclosures correlate with measures of disclosure length and disclosure boilerplate. Our results suggest that lengthy and more boilerplate risk factor disclosures are less likely to be considered inadequate under judicial and regulatory review. Specifically, risk factor disclosures that are lengthier and less specific are less likely to be flagged as inadequate for safe harbor purposes under the Private Securities Litigation Reform Act. In addition, more standardized risk factor disclosures are less likely to be targeted by an SEC comment letter during the SEC’s filing review process.
URI:http://hdl.handle.net/10125/59317
Appears in Collections: 18 Financial: Credit ratings/Intangible assets/other financial accounting issues


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