Threatened by wildfires: What do firms disclose in their 10‐Ks?

This study examines the determinants of firms’ 10-K disclosures on the threat of and exposure to wildfires. We match the location of wildfires in the United States to firms in the same county as the wildfire. We first establish that wildfire disclosure is far from widespread. On average, 6.1 percent of firms with wildfires in their headquarter county mention wildfire information in their 10-Ks. Second, we find that the number of days of wildfire exposure is a key determinant of wildfire 10-K disclosure. The sensitivity of wildfire disclosure to wildfire exposure has also increased in recent years, potentially due to heightened concerns about climate change. Third, we find that the sensitivity of wildfire disclosure to exposure emanates mainly from firms having experienced wildfires impacting their past operations, in the western states, in the utility and banking industries, and those exhibiting a high level of tangible assets. Fourth, we find that wildfire exposure has no bearing on stock price, whereas more wildfire-related disclosure lowers stock price. These findings deepen our knowledge of a heretofore unstudied disclosure factor potentially important for assessing firm value.