Abstract
The informativeness of textual risk disclosure (TRD) of financial firms is unexplored in the extant literature. Employing a sample of UK FTSE all-share financial firms, this paper fills this gap in the literature by providing the first empirical evidence on the relationship between TRD and market liquidity. Consistent with the convergence argument for TRD, we find that TRD decreases the financial firms’ market liquidity. However, consistent with the divergence argument for TRD, our further analysis shows that TRD increases the market liquidity of large financial firms. Overall, our results suggest that financial firms’ TRD is informative to market participants. In addition to the practical and policy implications of our results, this paper opens avenues for future research to use our textual method to measure the determinants and use risk information of financial firms in different contexts.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
