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Ousayna Zreik and Wael Louhichi
''Risk Disclosure and Company Unsystematic, Systematic, and Total Risks''
( 2017, Vol. 37 No.1 )
Recently, researchers have largely studied the impact of risk communication on several factors. In this paper, we examine the association between the communication about risk through annual reports and unsystematic, systematic, and total risks. We use the content analysis method to measure risk communication and the market model to measure the three types of risk. We find that increased risk disclosure is associated with decreased unsystematic and total risks and increased systematic risk. Two complementary analyses are performed. The first of these analyses examines the impact of risk communication on company risks before, during and after the financial crisis of 2008. The second analysis distinguishes high-risk from low-risk companies. The results reveal that the impact of risk communication on company risks depends on estimated period (pre-crisis, during crisis or post-crisis). Moreover, we observe that low-risk companies reduce their risk level through more risk communication.
Keywords: Risk disclosure; annual report; content analysis; systematic risk; unsystematic risk
JEL: G3 - Corporate Finance and Governance: General
Manuscript Received : Jul 22 2016 Manuscript Accepted : Mar 05 2017

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