Repetitive Disclosures in the MD&A

Abstract

Repetitive disclosures refer to the extent that content in the MD&A is repeated from the audited financial statement notes. I empirically analyze repetitive disclosures in the Management Discussion and Analysis (MD&A) section of the 10-K filing, and find that firms tend to use more repetitive disclosures when firms have a new CEO, a high level of new disclosures in the notes, issued equity, and missed prior year’s earnings benchmark. These findings suggest some managers use repetitive disclosures to emphasize firm-specific news, consistent with the succession hypothesis. The Securities and Exchange Commission (SEC) believes that repetitive disclosures are uninformative. Contradicting the SEC’s views, I find that repetitive disclosures are informative to investors as absolute cumulative stock returns around 10-K filing date is positively associated with repetitive disclosures, this result is particularly strong for individual investors. Overall, my results suggest that repetitive disclosures are informative and that such disclosures can be an effective tool for providing information to investors.

Keywords: MD&A, Repetitive disclosures, Successive communication

JEL Classification: M4, M41