Threatened by Wildfires: What Do Firms Disclose in Their 10-Ks?

Abstract

We examine the determinants of firms’ 10-K disclosures on the threat of and exposure to wildfires. We match the location of wildfires in the United States to firms in the same county as the wildfire. We first establish that wildfire disclosure is far from widespread. On average, 6.1 percent of firms with wildfires in their headquarter county mention wildfire information in their 10-Ks. Second, we find that the number of wildfire days in a company’s headquarter county is a key determinant of wildfire disclosure. The sensitivity of wildfire disclosure to wildfire exposure has also increased in recent years, emanating mainly from firms having experienced wildfires impacting their past operations, in the western states and the utility and banking industries, and from those exhibiting a high level of tangible assets. Third, we find that wildfire exposure has no bearing on stock price, whereas more wildfire-related disclosure lowers stock price.

Keywords: Wildfire risk, wildfire exposure, 10-K disclosure, determinants of wildfire disclosure

JEL Classification: G10, M41, M48, Q51, Q56