10-K Disclosure Repetition and Managerial Reporting Incentives
Forthcoming in the Journal of Financial Reporting
Posted: 27 Aug 2014 Last revised: 21 Sep 2017
Date Written: December 1, 2016
Standard setters and investors have expressed concern about the substantial amount of repetition of information found within firms’ 10-K disclosures. Ostensibly, such repetition is the result of overlapping disclosure requirements that solicit similar information in separate sections of the 10-K. Our evidence, however, suggests that repetition of information within the 10-K is also a strategic response to managers’ reporting incentives. We find evidence that, on average, discretionary repetition of information within the 10-K is driven by both litigation concerns and by managers’ incentives to report information more opaquely when earnings performance is poor. We find that greater repetition of information within the 10-K is associated with slower price discovery following the 10-K filing date. Overall, our results suggest that current overlap in disclosure requirements allows managers to repeat information in ways that serve their strategic reporting purposes but that do not result in increased clarity for investors.
Keywords: Disclosure regulation, Disclosure effectiveness, Narrative disclosure, Repetition, Textual Analysis
JEL Classification: D8, G38, M4
Suggested Citation: Suggested Citation