10-K Filing Length and M&A Returns

51 Pages Posted: 23 Oct 2015 Last revised: 30 Oct 2018

See all articles by Justin Chircop

Justin Chircop

Lancaster University Management School

Monika Tarsalewska

University of Exeter Business School

Date Written: October 2018

Abstract

This article 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 acquisition costs by making more information about the target available, and increase processing costs by increasing the difficulty of extracting information about the target. 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 processing costs. This relation is stronger when 10-K filings contain text denoting risks, and when the acquirer has limited access to private information about the target firm. 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 (October 2018). 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 )

XFI building, Streatham Campus
Rennes Drive
Exeter, Devon EX4 4ST
United Kingdom

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