Changes in Public Companies’ Risk Disclosures after Regulatory Intervention: A COVID-19 Risk Disclosure Setting

ABSTRACT In this study, we use a textual analytics approach to assess whether the communicative quality of risk factor disclosures in 10-K filings improved following new voluntary regulatory guidance during a globally disruptive event. Specifically, we focus on the COVID-19 context. Surprisingly, our analyses reveal that the communicative quality of COVID-19 risk disclosures did not improve; rather, it declined after the SEC’s guidance and continued to decrease throughout the study period. Further analysis reveals that this decline coincides with an increasing trend in companies’ compliance with the textual delineations of SEC’s COVID-19 risk disclosure guidance, suggesting a possible tradeoff effect between compliance with textual content and communicative quality. Our study contributes to the risk disclosure literature and provides researchers and stakeholders with insights to better understand these issues and potentially enhance corporate disclosures and transparency. Data Availability: Please contact the authors.