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Do Risk Summaries Actually Help Investors Understand Financial Risks?
Summary
Accounting and Reporting
Financial Accounting
Technology
Risk factor disclosures in 10-Ks are often lengthy and hard for investors to connect to specific financial statement impacts. The SEC now requires firms with more than 15 pages of risk factors to include a two-page risk summary (Regulation S-K Item 105). This study tests whether that summary improves investor judgments and evaluates an alternative design: two-way hyperlinks that connect risk disclosures directly to related financial statement line items.