Too Much of a Good Thing? Risk Disclosure and Corporate Innovation

54 Pages Posted: 30 Sep 2017 Last revised: 22 Jan 2022

See all articles by Shiu-Yik Au

Shiu-Yik Au

University of Manitoba - Asper School of Business

Hongping Tan

McGill University

Date Written: January 20, 2022


Using textual analysis of 10-K filings for US firms, we find that the SEC mandate for the disclosure has a negative effect on both the inputs and outputs of corporate innovation, with no corresponding decrease in capital expenditures. By exploiting an SEC regulation change as a quasi-natural experiment, we conduct differences-in-differences and regression discontinuity design tests and identify that it is the mandate for risk disclosure that reduces corporate innovation. Further analysis identifies a potential channel for this; there is a larger negative impact of mandatory risk disclosure on innovation among firms with financial constraints. These results are consistent with theoretical predictions that increased disclosure can have unintended consequences for firms making uncertain investments, such as innovation.

Keywords: Risk, disclosure, innovation, patents, research and development, 10-K filings, Item 1A

JEL Classification: G30, M40, O30, O31, O32

Suggested Citation

Au, Shiu-Yik and Tan, Hongping, Too Much of a Good Thing? Risk Disclosure and Corporate Innovation (January 20, 2022). Available at SSRN: or

Shiu-Yik Au (Contact Author)

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
(204) 474-9783 (Phone)

Hongping Tan

McGill University ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1

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