Disclosing Risks

Dr. David Tabak of NERA Economic Consulting has written a working paper on the relationship between risk disclosures and damages in securities class actions. CFO.com has an article discussing the paper.

Quote of note (CFO.com): “Given the increasing potential for shareholder lawsuits, Tabak believes that top managers should give greater weight to the option of revealing the possibility of bad news before it becomes a certainty. The realization of such perils as an adverse interest-rate movement, a product failure, or an impending government probe ‘could easily lead to a large decline in a company’s stock price’ — a greater decline, he asserts, than what would have occurred earlier if the company had merely disclosed the probability that an event would take place.”

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