Journal Articles

SEC market risk disclosures: Implications for judgment and decision making

2001, Accounting Horizons

L. Hodder, L. Koonce, M. McAnally


In this paper, we draw on judgment and decision making research to examine the behavioral implications of the SEC's Financial Reporting Release No. 48 on market risk disclosures. While these disclosures have been examined using archival data, no research has investigated how these disclosures might affect individual users of financial statements. The purpose of our paper is to draw on research in the judgment and decision making arena to identify and analyze the behavioral implications of the new risk disclosures. We offer three conclusions. First, FRR48 users may have more complex evaluations of risk than perhaps anticipated by the SEC. Second, the flexibility accorded firms in FRR48 will adversely affect users' risk judgments. Third, because the Release does not require disclosure of certain quantitative information that is important to risk assessments, inappropriate risk assessments may result. We believe our insights can help others conduct research in this important area and can help the SEC when they revisit the disclosure requirements in Release No. 48.


Hodder, L., L. Koonce, and M. McAnally (2001), "SEC market risk disclosures:  Implications for judgment and decision making."  Accounting Horizons, March.

Kelley School of Business

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