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

55 Pages Posted: 21 Dec 2020

See all articles by Balasingham Balachandran

Balasingham Balachandran

Dept of Economics, Finance and Marketing, 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

Bond University; University of Queensland

Syed Shams

University of Southern Queensland

Date Written: September 29, 2020

Abstract

This study investigates value-relevant implications of target-firm annual report readability for acquiring firms. We document robust evidence that readability has a positive association with bidder market reaction. This finding is more pronounced among firms with higher levels of opacity, lower analyst following; bidders with lower managerial ability; and less reputed M&A advisors. Further, in terms of other M&A outcomes, readability has a positive association with the bid premium and long-term bidder performance, and a negative association with the time to complete the M&A. Overall, these findings indicate that markets do value the readability of target 10-K filings – readability does matter to 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 Shams, Syed, Does the Readability of Target Firm’ Annual Reports Matter to Bidders? (September 29, 2020). Available at SSRN: https://ssrn.com/abstract=3730737 or http://dx.doi.org/10.2139/ssrn.3730737

Balasingham Balachandran

Dept of Economics, Finance and Marketing, La Trobe Business School, La Trobe University ( email )

Dept of Economics, Finance and Marketing,
La Trobe Business School, La Trobe University
Bundoora, Victoria 3086
Australia
+61394793103 (Phone)

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)

Bond University ( email )

Gold Coast, QLD 4229
Australia

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Syed Shams

University of Southern Queensland

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

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