Financial Reporting Complexity and Investor Underreaction to 10-K Information

You, Haifeng; Zhang, Xiao-Jun

doi:10.2139/ssrn.985365

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Financial Reporting Complexity and Investor Underreaction to 10-K Information

Review of Accounting Studies, Vol. 14, No. 4, 2009

45 Pages Posted: 13 May 2007 Last revised: 7 Feb 2012

See all articles by Haifeng You

Haifeng You

Hong Kong University of Science & Technology (HKUST) - Department of Accounting

Xiao-Jun Zhang

University of California, Berkeley; China Academy of Financial Research (CAFR)

Date Written: October 1, 2007

Abstract

We study the immediate and delayed market response to 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 filings contain useful information about future firm performance. In addition, investors' reaction to 10-K information seems sluggish, as evidenced by the stock price drift during the twelve month period after 10-K filing. We find that investors' under-reaction tends to be stronger for firms with more complex 10-K filings.

Suggested Citation: Suggested Citation

You, Haifeng and Zhang, Xiao-Jun, Financial Reporting Complexity and Investor Underreaction to 10-K Information (October 1, 2007). Review of Accounting Studies, Vol. 14, No. 4, 2009, Available at SSRN: https://ssrn.com/abstract=985365 or http://dx.doi.org/10.2139/ssrn.985365