This paper examines the effect of Sarbanes-Oxley provisions on 10-K filing delays. We find that tightened filing deadlines for accelerated and large accelerated filers are not associated with changes in the incidence of late filing. While Section 404 compliance does not affect filing timeliness for firms with effective internal controls, we find that about half the firms disclosing internal control weaknesses are late filers. As a consequence, many Section 404 material weakness firms experience negative abnormal returns around late filing notifications before filing the 10-K. Lastly, we find that market reactions to late filing notifications are more negative when management provides no meaningful explanation for the delay, consistent with managers' incentives to withhold bad news.

No abstract

Researchers, regulators, and practitioners have expressed concerns that the increase in disclosures in annual reports of firms over the past decades has resulted in unintended consequences for financial statement users. We investigate whether increases in disclosure requirements are associated with increased difficulty to use financial statements. We create an index measuring firms' increasing exposure to regulation-induced disclosures in their 10-K filings and show that a higher index is on average associated with longer analyst delay, lower analyst accuracy, and higher dispersion. Consistent with information overload theory, we also find evidence consistent with an inverted-U curve: As regulation-induced disclosures increase, the decision quality of analysts initially increases. However, above a certain level of disclosures, increases in disclosures are associated with a decrease in the decision quality of analysts, as evidenced by an increase in analyst delay and dispersion and a decrease in accuracy. In addition, these adverse effects are more pronounced when analysts are less experienced, follow more firms, and have access to fewer resources. Overall, the findings suggest that increases in regulation-induced disclosures, above a certain level, are associated with information overload.

No abstract

No abstract