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When investors talk, firms listen: How risk disclosure caters to investor sentiment

Author

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  • Xu, Renren
  • Yu, Yiwei
  • Wang, Jiacan

Abstract

This study explores how firm-level investor sentiment on stock forums shapes risk disclosure from the perspective of managerial catering. We have four main findings: 1.When firm-level investor sentiment is high, firms tend to reduce the volume of disclosed risk information while adopting a more optimistic tone. 2.Emotional contagion mediates firms' responses to firm-level sentiment mainly by altering disclosure tone, with negative sentiment showing stronger contagion effects. 3.The catering behavior is more pronounced in bull markets, low regulatory markets and companies without institutional ownership. 4.Market-level investor sentiment and firm-level investor sentiment have different impacts on risk disclosure.

Suggested Citation

  • Xu, Renren & Yu, Yiwei & Wang, Jiacan, 2025. "When investors talk, firms listen: How risk disclosure caters to investor sentiment," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015533
    DOI: 10.1016/j.frl.2025.108299
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