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Tariff-risk disclosure in 10-Ks and stock market responses to the Liberation Day shock

Author

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  • Andreou, Christoforos K.
  • Andreou, Panayiotis C.
  • Djouvas, Constantinos
  • Lambertides, Neophytos

Abstract

This study investigates how firms’ recognition of tariff-related risk in (pre-shock) 10-K disclosures affects stock-market reactions to the April 2, 2025, “Liberation Day” tariff shock. We use a machine-learning approach to identify semantically meaningful tariff-risk recognition across the entire 10-K filing, with separate analyses for Risk Factors (“Item 1A”) and the remaining sections of the filing, excluding Item 1A (“Other”). Our results show that firms that explicitly acknowledge tariff risk experience significantly lower abnormal returns around the announcement. Interestingly, this effect is not driven by disclosures in the Item 1A section, but instead arises from tariff-risk recognition in the Other sections of the 10-K and is concentrated among firms facing high litigation risk. The findings highlight the informational role of narrative risk recognition and the importance of where such disclosures appear within corporate filings.

Suggested Citation

  • Andreou, Christoforos K. & Andreou, Panayiotis C. & Djouvas, Constantinos & Lambertides, Neophytos, 2026. "Tariff-risk disclosure in 10-Ks and stock market responses to the Liberation Day shock," Economics Letters, Elsevier, vol. 264(C).
    • Handle: RePEc:eee:ecolet:v:264:y:2026:i:c:s0165176526001412
    DOI: 10.1016/j.econlet.2026.112947
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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