IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v69y2023i10p6313-6332.html
   My bibliography  Save this article

The Opposing Effects of Complexity and Information Content on Uncertainty Dynamics: Evidence from 10-K Filings

Author

Listed:
  • Joon Woo Bae

    (Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio 44106)

  • Frederico Belo

    (INSEAD, 77300 Fontainebleau, France; Centre for Economic Policy Research, London EC1V 0DX, United Kingdom)

  • Jun Li

    (Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

  • Xiaoji Lin

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • Xiaofei Zhao

    (McDonough School of Business, Georgetown University, Washington, District of Columbia 20057)

Abstract

We evaluate the impact of complexity and information content of 10-K filings on uncertainty dynamics following the filings. We have three main findings. First, the option-implied volatility on average increases in the first four weeks after the filings, followed by a net decrease in the subsequent six weeks. Second, this hump-shaped volatility dynamic is more pronounced for firms with larger 10-K file sizes. Third, we provide a novel decomposition of 10-K file size based on the individual sections’ disclosure amount and topic analysis and find that the discussions on topics in the “risk factors” section mainly capture the complexity aspect, whereas the discussions on topics in the “managerial discussion and analysis” section mainly capture the information content aspect of the 10-K filings. Our findings highlight the importance of timing for understanding the opposing effects of complexity and information content on asset prices.

Suggested Citation

  • Joon Woo Bae & Frederico Belo & Jun Li & Xiaoji Lin & Xiaofei Zhao, 2023. "The Opposing Effects of Complexity and Information Content on Uncertainty Dynamics: Evidence from 10-K Filings," Management Science, INFORMS, vol. 69(10), pages 6313-6332, October.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6313-6332
    DOI: 10.1287/mnsc.2022.4615
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.4615
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.4615?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6313-6332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.