Risk Disclosure in Business Communication during Pandemic: Evidence from Family Firms

Abstract

This paper investigates the role of family ownership in shaping risk disclosure in response to the events caused by the recent outbreak of COVID-19 pandemic. Using the Loughran and McDonald’s (2011; 2016) and Kravet and Muslu’s (2013) bag of words, we find that family-owned firms use a lower level of risk disclosure. This finding is consistent with the argument that family firms have more resilient organizations, and thus expect to better handle the uncertainty of a disruptive shock. In an additional analysis, we find, however, that risk disclosure increases when family firms are governed by older CEOs, who are possibly more concerned about the ability of future-generation CEOs to overcome the current crisis. The results contribute to the recent literature on the drivers of organizational resilience during extreme events such as natural disasters, financial crises, and spikes in political uncertainty.Keywords: Risk disclosure, Family Firms, COVID-19 Pandemic.