Does the Readability of Target Firm’ Annual Reports Matter to Bidders?

54 Pages Posted: 21 Dec 2020 Last revised: 10 Jan 2022

See all articles by Balasingham Balachandran

Balasingham Balachandran

La Trobe Business School, La Trobe University; Financial Research Network (FIRN)

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland; Bond University

Kristina Minnick

Bentley University

Syed Shams

University of Southern Queensland

Date Written: December 01, 2021

Abstract

This study investigates the value-relevant implications of the target firm’s annual report readability for acquiring firms. We find robust evidence that readability has a positive association with bidder market reaction and bid premiums, as well as a negative association with the time to complete the M&A. Certain deal characteristics such as the number of bidders, the type of offer, and the quality of the advisors on the deal, enhance the importance of readability. Additionally, this finding is more pronounced among targets with less transparency or less entrenched managers. Overall, these findings indicate that the readability of target 10-K filings matters to investors and bidding firms.

Keywords: 10-K Filing Readability, Acquisition Performance, Mergers and Acquisitions, Information Asymmetry

JEL Classification: G32, G34, M41

Suggested Citation

Balachandran, Balasingham and Duong, Huu Nhan and Faff, Robert W. and Minnick, Kristina and Shams, Syed, Does the Readability of Target Firm’ Annual Reports Matter to Bidders? (December 01, 2021). Available at SSRN: https://ssrn.com/abstract=3730737 or http://dx.doi.org/10.2139/ssrn.3730737

Balasingham Balachandran

La Trobe Business School, La Trobe University ( email )

La Trobe Business School
La Trobe University
Bundoora, Victoria 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Huu Nhan Duong

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Bond University ( email )

Gold Coast, QLD 4229
Australia

Kristina Minnick

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://www.profminnick.com/

Syed Shams

University of Southern Queensland

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

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