COVID-19 Risk Factors and Boilerplate Disclosure
Virginia Public Law and Legal Theory Research Paper No. 2024-21
Virginia Law and Economics Research Paper No. 2024-10
39 Pages Posted: 13 Feb 2024 Last revised: 7 Apr 2024
Date Written: February 19, 2024
Abstract
The SEC mandates that public companies assess new information that changes the risks that they face and disclose these if there has been a “material” change. Does that theory work in practice? Or are companies copying and repeating the same generic disclosures? Using the shock of the COVID-19 pandemic, we explore these questions. Overall, we find considerable rote copying of boilerplate disclosures. Further, the factors that correlate with deviations from the boilerplate seem related more to the resources that companies have (large companies change updated disclosures more) and litigation risks (companies vulnerable to shareholder litigation update more) rather than general economic vulnerability to the pandemic. The exception is companies facing exposure to China.
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