Fuzzy evaluation of risk management profiles disclosed in corporate annual reports

The most common measures of risk have traditionally been based on quantitative financial and accounting information. However, new information on risk management disclosed in companies' annual reports is generally qualitative or linguistic. As such, exploitation by decision makers becomes difficult. In this study, a fuzzy analysis approach is applied to risk information disclosed by 217 firms listed on the Toronto Stock Exchange. The results provide some evidence that these fuzzy measures are reasonable proxies for traditional financial and accounting measures. They also show that fuzzy measures can predict a significant amount of systematic risk.