The information content of 10‐K file size change

Quan Gan and Buhui Qiu ()

International Review of Finance, 2021, vol. 21, issue 4, 1251-1285

Abstract: Change in 10‐K file size robustly and negatively predicts future stock returns. The documented return predictability reflects mainly information content of 10‐K file size change on future cash flow news. We examine whether this return predictability derives from managers' risk disclosures or disclosure obfuscation. We find that the return predictability increases in future return horizon. It is driven by positive file size changes and is stronger for firms with high information asymmetry. It is stronger when managers have more “skin in the game.” It persists even when investor attention is high. It derives from the component of file size change that cannot be explained by business fundamentals. Although word count changes in specific 10‐K items can predict future stock returns, word count change in Item 1A, the risk disclosure section, has no return predictability. Our findings are broadly consistent with the managerial disclosure obfuscation explanation and suggest that lengthier 10‐K disclosure, to the extent it is used by managers to obfuscate bad news, does not necessarily benefit shareholders.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/irfi.12324

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:irvfin:v:21:y:2021:i:4:p:1251-1285

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1369-412X

Access Statistics for this article

International Review of Finance is currently edited by Bruce D. Grundy, Naifu Chen, Ming Huang, Takao Kobayashi and Sheridan Titman

More articles in International Review of Finance from International Review of Finance Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().