10-K Filing Length and M&A Returns

The European Journal of Finance, Forthcoming

57 Pages Posted: 23 Oct 2015 Last revised: 22 Nov 2019

See all articles by Justin Chircop

Justin Chircop

Lancaster University Management School

Monika Tarsalewska

University of Exeter Business School

Date Written: November 21, 2019

Abstract

This study examines the association between 10-K filing length and M&A returns. We posit that 10-K filing length influences shareholder information acquisition and processing costs. Longer 10-K filings reduce information acquisition costs by making more information about the target available to the shareholder, but may increase information processing costs by increasing the difficulty of extracting that information. Which effect dominates ultimately determines the association between 10-K filing length and M&A returns. We find that 10-K filing length is positively related to M&A returns, suggesting that the reduction in information acquisition costs dominates the increase in information processing costs. This relation is stronger when the acquirer has limited access to private information about the target, and when 10-K filings contain text denoting risk. The relation is weaker when 10-K filings contain complex text and financial statements exhibiting high accounting quality.

Keywords: 10-K filing length; mergers and acquisitions; information acquisition costs; information processing costs; market returns

JEL Classification: D82, D83, M41

Suggested Citation

Chircop, Justin and Tarsalewska, Monika, 10-K Filing Length and M&A Returns (November 21, 2019). The European Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2677660 or http://dx.doi.org/10.2139/ssrn.2677660

Justin Chircop

Lancaster University Management School ( email )

Lancaster University
Lancaster, Lancashire LA1 4YX
United Kingdom

Monika Tarsalewska (Contact Author)

University of Exeter Business School ( email )

Streatham Court, Streatham Campus,
Rennes Drive
Exeter, Devon EX4 4PU
United Kingdom

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