Measuring the differentiation and decentralization of managers' risk attention and their impacts

Abstract

AbstractManagers' attention to different risk factors conveys important information to investors. This paper examines the association between managers' risk attention allocation schemes and the performance of firms across different sectors. We innovatively use the text mining approach to measure the differentiation and decentralization of risk attention from textual risk disclosures reported in 65,878 10-K statements. The results show significant sector heterogeneity in managers' attention to different risk topics. For the consumer goods sector, managers with differentiated and decentralized topics can improve the company's profitability and solvency. In contrast, managers in the financial and healthcare sectors need to maintain topic attention concentration. In addition, we find that managers' attention to product approval, system security, and business impact has gradually increased over time to adapt to the internet economic environment.Keywords: Risk factorstopic attentiontext mining10-K statementssector heterogeneity Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 SEC (2010). Form 10-K instructions. www.sec.gov/about/forms/form10-k.pdf.Additional informationFundingThis study was supported by the National Natural Science Foundation of China [Nos. 72091515]. Notes on contributorsLing ZhouLing Zhou, Ph.D., postdoctoral fellow at Central South University, mainly focuses on causal inference, policy analysis, and text analysis.Zongrun WangZongrun Wang, Professor of Central South University, the head of major and key projects of the National Natural Science Foundation of China, the head of the Applied Economics discipline at Central South University. have long been committed to researching risk management technologies and methods in the field of data analysis and management science, with a particular focus on risk measurement, integration, and decision-making theories and methods, actively carry out academic research and practical work on financial engineering and risk management technology methods.Jianxin WangJianxin Wang is an Associate Professor at Central South University. He received his PhD in Economics from George Mason University and his PhD in Management Science and Engineering from Central South University. His research interests include behavioral economics, experimental economics, and behavioral finance, with a special focus on behavioral economics of alcohol intoxication. He has published in PNAS, Journal of Corporate Finance, Experimental Economics, Journal of Economic Behavior & Organization and Economics Letters.