It pays to partner with a firm that writes annual reports well✰

Mufaddal Baxamusa, Abu Jalal and Anand Jha

Journal of Banking & Finance, 2018, vol. 92, issue C, 13-34

Abstract: We use strategic alliances as a setting to examine whether the readability of a firm's partner's 10-K matters. We find that the increase in the cumulative abnormal return (CAR) around the announcement of an alliance is relatively lower when the firm's partner in a strategic alliance has a less readable 10-K report. Additional tests show that the impact of the readability of a partner's 10-K is much stronger when investors suspect insufficient due diligence before the alliance's formation, when the partner is from a different industry, and when the alliance occurs before the Sarbanes–Oxley Act. Overall, our results show that the readability of a partner's annual report matters—it pays to partner with a firm that writes these reports well.

Keywords: Strategic alliance; Readability; 10-Ks; Annual reports (search for similar items in EconPapers)
JEL-codes: G02 G14 G32 M41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:92:y:2018:i:c:p:13-34

DOI: 10.1016/j.jbankfin.2018.04.020

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