Do investor reactions to merger announcements shape the writing of SEC filings?

Abstract

The way filings of mergers and acquisitions (M&A) with the Security Exchange Commission (SEC) are written might depend on investor reactions to initial public announcements of the deal. The current research aims to test this investor feedback hypothesis in an empirical setting that is free of reverse causality. We therefore manually collect a large sample of SEC documents and quantify their readability. The results are unambiguous: Acquirers write documents with lower readability and file them faster when investors react negatively to the deal announcement. These results are in line with strategic obfuscation efforts and also are robust to alternative empirical choices, such as controlling for content complexity or the firm’s writing style and using an instrumental variables approach.

Keywords: SEC filings, readability, time to file, mergers and acquisitions, investor feedback

JEL Classification: G34, G40