Management Disclosure of Risk Factors and COVID-19

15 Pages Posted: 14 Apr 2020 Last revised: 15 Sep 2022

See all articles by Tim Loughran

Tim Loughran

University of Notre Dame

Bill McDonald

University of Notre Dame - Mendoza College of Business - Department of Finance

Date Written: September 15, 2022


Public companies in the United States are required to file annual reports (i.e., Form 10-K) and disclose, among other things, the risk factors that might negatively affect the price of their stock. The risk of a pandemic was well known before the recent crisis and we now know the initial impact for many shareholders was significant and negative. To what extent did managers forewarn their shareholders of this valuation risk? We examine all 10-K filings from 2018, well before any knowledge of the current pandemic, and find that less than 21% of the filings contain any reference to pandemic-related terms. Given management’s presumably deep understanding of their business and general awareness that, for at least the past decade, pandemics have been identified as a significant global risk, it seems that this number should have been higher. At the industry level, we find an unexpected positive correlation (0.137) between the use of pandemic-related words in annual reports and realized stock returns during the actual pandemic. Some of the industries hardest hit by COVID barely mentioned pandemic risk in their financial disclosures to shareholders, indicating that managers were not effective in highlighting their exposure to pandemic risks to investors.

Keywords: pandemic, COVID-19, Form 10-K, risk factors

JEL Classification: G12, G18, G38, G02

Suggested Citation

Loughran, Tim and McDonald, Bill, Management Disclosure of Risk Factors and COVID-19 (September 15, 2022). Available at SSRN: or

Tim Loughran (Contact Author)

University of Notre Dame ( email )

Department of Finance
245 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-8432 (Phone)
574-631-5255 (Fax)

Bill McDonald

University of Notre Dame - Mendoza College of Business - Department of Finance ( email )

University of Notre Dame
Notre Dame, IN 46556-0399
United States
574-274-2333 (Phone)

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