We examine whether estimated taxable income provides incremental information about firms' operating risk. We develop taxable income-based measures that should be useful in assessing risk in a simple earnings predictability model. In our empirical tests these taxable income-based measures explain...

Beginning in 2005, the SEC mandated firms to include a “risk factor” section in their Form 10-K to discuss “the most significant factors that make the company speculative or risky.” This suggests that regulators believe that investors benefit from disclosures about firm risk and...