Discussion of a framework for the analysis of firm risk communication

This paper investigates the motivations behind the associations between the M&A risk level and the M&A risk reporting. For a sample of 231 M&As, I performed a detailed content analysis of Item 1A of the 10-K filing after the completion of M&As. While the M&A risk reporting quantity captures the number of M&A risk factors, the M&A risk reporting quality additionally reflects the M&A risk reporting depth and width. The results suggest that the M&A risk reporting quantity and quality are related but not identical theoretical constructs. Overall, consistent with the transparency motivation, a higher M&A risk level encourages managers to increase the M&A risk reporting quantity and quality. Managers will disclose more M&A risk factors if the target firm is relatively large and from a foreign country, a relatively large amount of the purchase price is allocated to goodwill, and the M&A intensity is high.