Risk disclosure, income smoothing and firm risk

What is it about?

In the context of risk reporting, firms with higher risk may choose to increase (not increase) the level of risk reporting or report (not report) a smoother stream of income. We examine in a sample of FTSE 100 firms over the period 2005-2015 whether the level of risk reporting and income smoothing are complementary/substitutive reporting mechanisms with respect to firm risk levels. We find evidence of a complementary association with respect to some risk factors but a substitutive one with respect to non-risk factors.

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