Financial reporting complexity and investor underreaction to 10-K information

Haifeng You () and Xiao-jun Zhang ()
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Haifeng You: Barclays Global Investors
Xiao-jun Zhang: University of California

Review of Accounting Studies, 2009, vol. 14, issue 4, No 5, 559-586

Abstract: Abstract We study the immediate and delayed market reaction to U.S. Securities and Exchange Commission (SEC) EDGAR 10-K filings. Unusual trading volumes and stock-price movements are documented during the days around the 10-K filing dates. The abnormal price movements are positively associated with future accounting profitability, indicating that 10-K reports contain useful information about future firm performance. In addition, investors’ reaction to 10-K information seems sluggish, as demonstrated by the stock-price drift during the 12-month period after 10-K filing. We find that investors’ underreaction tends to be stronger for firms with more complex 10-K reports.

Keywords: Stock price drift; 10-K filing; Financial reporting complexity (search for similar items in EconPapers)
JEL-codes: D53 D8 G14 M41 (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/s11142-008-9083-2

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