Early evidence on the informativeness of the SEC's market risk disclosures: The case of commodity price risk exposure of oil and gas producers

The paper provides early evidence on the informativeness of commodity price risk measures required by the Securities and Exchange Commission's new mar ket risk disclosure rules (SEC 1997), I use existing disclosures of oil and gas producers (O&G) to obtain proxies for the tabular and sensitivity anal ysis disclosures required by the new SEC rules. I find that proxies for the tabular and the sensitivity analysis format are significantly associated w ith O&G firms' stock return sensitivities to oil and gas price movements. T his finding casts doubt on claims that the new market risk disclosures do n ot reflect firms' risk exposures. The proxies for the tabular format and se nsitivity format disclosures are not substitutable explanations of firms' r isk exposures. This evidence suggests that disclosures from one disclosure format are not comparable to those from the other reporting format.