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Financial reporting complexity and investor underreaction to 10-K information

Author

Listed:
  • Haifeng You

    (Barclays Global Investors)

  • Xiao-jun Zhang

    (University of California)

Abstract

We study the immediate and delayed market reaction to U.S. Securities and Exchange Commission (SEC) EDGAR 10-K filings. Unusual trading volumes and stock-price movements are documented during the days around the 10-K filing dates. The abnormal price movements are positively associated with future accounting profitability, indicating that 10-K reports contain useful information about future firm performance. In addition, investors’ reaction to 10-K information seems sluggish, as demonstrated by the stock-price drift during the 12-month period after 10-K filing. We find that investors’ underreaction tends to be stronger for firms with more complex 10-K reports.

Suggested Citation

  • Haifeng You & Xiao-jun Zhang, 2009. "Financial reporting complexity and investor underreaction to 10-K information," Review of Accounting Studies, Springer, vol. 14(4), pages 559-586, December.
    • Handle: RePEc:spr:reaccs:v:14:y:2009:i:4:d:10.1007_s11142-008-9083-2
    DOI: 10.1007/s11142-008-9083-2
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    Cited by:

    1. Todd Kravet & Volkan Muslu, 2013. "Textual risk disclosures and investors’ risk perceptions," Review of Accounting Studies, Springer, vol. 18(4), pages 1088-1122, December.
    2. John L. Campbell & Hsinchun Chen & Dan S. Dhaliwal & Hsin-min Lu & Logan B. Steele, 2014. "The information content of mandatory risk factor disclosures in corporate filings," Review of Accounting Studies, Springer, vol. 19(1), pages 396-455, March.
    3. Lu Wei & Shufan Ma & Maoze Wang, 2025. "Understanding the information characteristics of consumers’ online reviews: the evidence from Chinese online apparel shopping," Electronic Commerce Research, Springer, vol. 25(4), pages 3071-3097, August.
    4. W. Brooke Elliott & Kristina M. Rennekamp & Brian J. White, 2015. "Does concrete language in disclosures increase willingness to invest?," Review of Accounting Studies, Springer, vol. 20(2), pages 839-865, June.
    5. Joost Impink & Martien Lubberink & Bart Praag & David Veenman, 2012. "Did accelerated filing requirements and SOX Section 404 affect the timeliness of 10-K filings?," Review of Accounting Studies, Springer, vol. 17(2), pages 227-253, June.
    6. Di Qi & Wen Chen, 2025. "R&D narrative disclosure and semantic similarity: evidence from China," Economic Change and Restructuring, Springer, vol. 58(5), pages 1-38, October.

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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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