Other Comprehensive Income and Investment Risk: a Study of the Brazilian Capital Market

The proposal of the FASB and IASB to include Other Comprehensive Income (OCI), as a component of comprehensive income has been the focus of debate. The main criticism is based on the argument that the intrinsic volatility of these items leads to a higher perception of risk, that is, when they are treated as a result. Without reaching a consensus, research has focused on assessing whether the risk is more related to net income or comprehensive income. Thus, whether the disclosure of OCI in the income statement may raise the level of investment risk, in relation to companies that do not have such information has not yet been explored. In this context, the purpose of this research was to analyze the impact of the OCI disclosure, through the Comprehensive Income Statement, in relation to the three risk measures: beta, value-at-risk and stock return volatility. The sample consisted of 170 companies between the years of 2004 to 2015. In order to obtain the results, the methods of difference-indifferences and propensity score matching were used. The results showed that, on average, the disclosure of OCI leads to a greater perception of risk by investors in relation to companies that do not have such information, and that this perception is related to the to OCI volatility.