Donn Dongshin Kim Research Focuses on Narrative Investment-Risk Disclosure & REIT Investment

As part of an U.S. Securities and Exchange Commission (SEC) requirement, publicly-traded companies submit comprehensive annual reports - commonly known as a Form 10K - with details about its financial performance. In Donn Dongshin Kim’s research paper Narrative Investment-Risk Disclosure & REIT Investment, he and co-authors Dongkuk Lim and Jonathan Wiley, explores narrative investment-risk disclosure and applied computational linguistic analysis to qualitative discussions of risk throughout 10-K filings. 

Kim’s research focuses specifically on the real estate investment trust (REIT) sector and the positive relationship between changes to investment-risk disclosures - such as capital market impacts as a result of discretionary changes - and actual investment. Higher quality disclosure can impact change in market liquidity, or cost of capital, by enhancing market participants’ ability to estimate the covariance between a firm’s cash flows, which then reduces the amount of non-diversifiable risk perceived by investors, ultimately reducing the firm’s cost of capital. The REIT industry is commonly characterized as having lower information asymmetry and greater incentives for transparency when compared to other industrial firms. 

The full research paper is available in The Journal of Real Estate Finance and Economics.