Are risk disclosures an effective tool to increase firm value?

The objective of this paper is to test the effect of risk disclosures on firm value. The results show that the disclosure of information on risks is positively associated with the value of a firm. In addition, our findings highlight that this association is mediated by corporate reputation, which improves for enhanced risk disclosure practices. This evidence is particularly important to understand the usefulness of the disclosure of information on risks in the dialogue between a firm and its stakeholders. Managers and regulators can better understand the consequences of the communication of information on risks.