Why are 10-K Filings so Long?

47 Pages Posted: 5 Jun 2014 Last revised: 8 Apr 2015

See all articles by Richard A. Cazier

Richard A. Cazier

University of Texas at El Paso - Department of Accounting

Ray J. Pfeiffer

Texas Christian University - Neeley School of Business

Date Written: April 2015

Abstract

This study provides evidence on relative magnitudes of factors that appear to drive 10-K length. We employ statistical analysis and text analysis software to partition 10-K length into the portions explained by each of three fundamental determinants: 1) firms’ operating complexity, 2) disclosure redundancy, and 3) residual disclosure. Our primary analyses shed light on the relative magnitudes of each of these components and on the extent to which each varies across firms. Disclosure redundancy and operating complexity explain roughly equal amounts of variation in 10-K length within our sample. However, 10-K length unexplained by redundancy or firms’ operating complexity (residual disclosure) accounts for the largest degree of variation in 10-K length. Our results are consistent with the notion that a substantial amount of disclosure volume contained in 10-K reports is attributable to managerial discretion in how firms respond to mandatory disclosure requirements. Our study expands prior literature that has focused largely on the consequences of 10-K length and provides important insights for policy makers and regulators seeking to improve disclosure requirements.

Keywords: Disclosure, Financial reporting regulation, 10-K length, Redundancy

JEL Classification: M41, K22, D82, G18

Suggested Citation

Cazier, Richard A. and Pfeiffer, Ray J., Why are 10-K Filings so Long? (April 2015). Available at SSRN: https://ssrn.com/abstract=2445511 or http://dx.doi.org/10.2139/ssrn.2445511

Richard A. Cazier (Contact Author)

University of Texas at El Paso - Department of Accounting ( email )

500 W University Ave
El Paso, TX 79902
United States
915-747-7755 (Phone)

Ray J. Pfeiffer

Texas Christian University - Neeley School of Business ( email )

TCU Box 298530
Fort Worth, TX 76129
United States
817-257-6435 (Phone)

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