Do companies redact material information from confidential SEC filings?

59 Pages Posted: 2 Aug 2018 Last revised: 24 Aug 2020

See all articles by Anne Thompson

Anne Thompson

University of Illinois at Urbana-Champaign

Oktay Urcan

University of Illinois at Urbana-Champaign

Hayoung Yoon

Southern Methodist University (SMU) - Accounting Department

Date Written: August 21, 2020

Abstract

U.S. public companies can redact information from required material contracts disclosures when
management asserts that the information is immaterial and would cause competitive harm if
publicly disclosed (i.e., it is proprietary). This study examines whether managers use this channel
to withhold material information from investors. We find that firms’ stock price discovery process
is significantly slower and insider trading is significantly greater after companies file redacted
contracts compared with non-redacted contracts. Using data obtained under the Freedom of
Information Act, we find that redacted material contracts withhold both quantitative and qualitative
information and redacted information is predictably associated with insider trading. These findings
suggest that at least some information redacted in material contracts is material to investors.

Keywords: Redaction, Confidential treatment, Insider trading, Proprietary cost, Agency cost

JEL Classification: M41

Suggested Citation

Thompson, Anne and Urcan, Oktay and Yoon, Hayoung, Do companies redact material information from confidential SEC filings? (August 21, 2020). Available at SSRN: https://ssrn.com/abstract=3224697 or http://dx.doi.org/10.2139/ssrn.3224697

Anne Thompson (Contact Author)

University of Illinois at Urbana-Champaign ( email )

360 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
United States

Oktay Urcan

University of Illinois at Urbana-Champaign ( email )

515 E. Gregory Drive
4009 BIF MC-520
Champaign, IL 61820
United States
217-265-0383 (Phone)
217-244-0902 (Fax)

HOME PAGE: http://business.illinois.edu/profile/oktay-urcan/

Hayoung Yoon

Southern Methodist University (SMU) - Accounting Department ( email )

United States

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