Does Risk Disclosure Signal Risk Management Outcome? An Examination of the SEC FRR No. 48 Disclosure’s Relation with Cash Flow Volatility

Simple item page
dc.contributor.author Lobo, Gerald
dc.contributor.author Siqueira, Wei
dc.contributor.author Tam, Kinsun
dc.contributor.author Zhou, Jian
dc.date.accessioned 2017-12-21T21:08:05Z
dc.date.available 2017-12-21T21:08:05Z
dc.date.issued 2017-08-31
dc.description Inquiries about this document can be made to <a href="mailto:HARC@hawaii.edu">HARC@hawaii.edu</a>
dc.description.abstract We hypothesize that the quality of market risk disclosure mandated by the U.S. Securities and Exchange Commission Financial Reporting Release No. 48 (FRR No. 48) provides useful signals for predicting risk management outcome. Measuring risk disclosure quality as the degree of modification, we find that higher-than-expected disclosure modification is associated with lower future cash flow volatility. On average, an increase in risk disclosure modification from the lowest to the highest decile is associated with a 4.4 percent decrease in cash flow volatility. We further document that this association is moderated by managers’ intention to manage risk. The market generally understands the implications of disclosure modification with respect to cash flow volatility, but its understanding has limitations. Our results should be of interest to those who seek to assess how a firm’s cash flows will fluctuate in the future.
dc.identifier.uri http://hdl.handle.net/10125/51952
dc.subject disclosure
dc.subject managerial decision
dc.subject risk management
dc.subject real effects
dc.subject signaling
dc.title Does Risk Disclosure Signal Risk Management Outcome? An Examination of the SEC FRR No. 48 Disclosure’s Relation with Cash Flow Volatility
Files
Collections
09 Financial: Manager Ability / Financial Analysts / Disclosure (FAR1)