Filing Speed, Information Leakage, and Price Formation

53 Pages Posted: 1 May 2019

See all articles by Jeffrey L. Callen

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Dan Segal

Interdisciplinary Center (IDC) Herzliyah

Date Written: March 31, 2019

Abstract

Form 8-K reports filed with the SEC often exhibit lags raising the potential for information leakage that could be exploited by informed traders. This study provides evidence that institutional investors are able to capitalize on 8-K filing lags. Consistent with extant theories, this study documents that institutional investors trade based on the leaked sign of the event news and then (partially) reverse their trades when the news become public. Moreover, the likelihood of the latter trading strategy increases with the filing lag. We also show that trading volume, equity return volatility and the bid-ask spread increase around the event date and the filing date. Further, trading volume and equity return volatilities around the filing date decrease with the filing lag indicating lower information content of the news.

Keywords: Filing Lag, Institutional Trading, 8-K Reports, Private Information

JEL Classification: M41, M48

Suggested Citation

Callen, Jeffrey L. and Kaniel, Ron and Segal, Dan, Filing Speed, Information Leakage, and Price Formation (March 31, 2019). Available at SSRN: https://ssrn.com/abstract=3363056 or http://dx.doi.org/10.2139/ssrn.3363056

Jeffrey L. Callen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

London
United Kingdom

Dan Segal (Contact Author)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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