Readability of 10-K Reports and Stock Price Crash Risk

• 成果类型: Article
• 署名作者: Kim, Chansog (Francis); Wang, Ke; Zhang, Liandong
• 署名单位: State University of New York (SUNY) System; Stony Brook University; University of Alberta; Singapore Management University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12452
• 发表日期: 2019
• 页码: 1184-1216
• 关键词: narrative disclosure; information-content; Textual analysis; CURRENT EARNINGS; management; complexity; QUALITY; cost; COMPENSATION; volatility

摘要

This study shows that less readable 10-K reports are associated with higher stock price crash risk. The results are consistent with the argument that managers can successfully hide adverse information by writing complex financial reports, which leads to stock price crashes when the hidden bad news accumulates and reaches a tipping point. Cross-sectional analyses show that the effect of financial reporting complexity on crash risk is more pronounced for firms with persistent negative earnings news or transitory positive earnings news, greater chief executive officer stock option incentives, or lower litigation risk. Finally, accrual manipulation appears to be positively related to crash risk, even since the Sarbanes-Oxley Act, if the manipulation is accompanied by complex 10-K reports.