Management Disclosure of Risk Factors and COVID-19

4 Pages Posted: 14 Apr 2020

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: April 13, 2020

Abstract

Public companies in the United States are required to file annual reports (Form 10-K) that, among other things, disclose the risk factors that might negatively affect the price of their stock. The risk of a pandemic was well known before the current crisis and we now know the impact for shareholders is, for almost all companies, 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.

Keywords: pandemic, epidemic, coronavirus, annual reports, risk factors

JEL Classification: G12, G18, G38, G02

Suggested Citation

Loughran, Tim and McDonald, Bill, Management Disclosure of Risk Factors and COVID-19 (April 13, 2020). Available at SSRN: https://ssrn.com/abstract=3575157 or http://dx.doi.org/10.2139/ssrn.3575157

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 )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
891
Abstract Views
4,470
rank
28,807
PlumX Metrics