The disclosure perspective of firm-specific political risk measure from conference calls

Hassan et al. (2019) quantified firm-specific political risk during corporate conference calls. We argue that this metric captures voluntary risk disclosure by firms rather than just their level of political risk. Studying the impact of political risk disclosure (PRD) on stock price crash risk (SPCR) allows us to test how well their score captures firm-specific risk or disclosure. Consistent with our disclosure perspective, we document that PRD significantly reduces SPCR. Our cross-sectional analyses further indicate that the negative effect of PRD on SPCR is more pronounced for firms with poor monitoring and governance and those with more opaque information environments.