10-K Filing Length and M&A Returns
51 Pages Posted: 23 Oct 2015 Last revised: 30 Oct 2018
Date Written: October 2018
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: Suggested Citation