Differential Response of Small versus Large Investors to 10-K Filings on EDGAR

Abstract

In this paper we examine the effect of filing form 10-K on EDGAR on the incidence of small and large trades. We find that the change to EDGAR filings results in significant increases in the volume of small, but not large trades, during the five-day window (−1, 3) around the filing date. While our data does not allow us to directly examine the trading profits and transactions costs of investors, we are able to examine whether the trading patterns reflect information available in the 10-K differently in the pre- and post-EDGAR period. Using stock return as a proxy for the information content of the 10-K, our results show that post-EDGAR small trades are more likely to reflect that information, i.e., more likely than in the pre-EDGAR period to be buys (sells) when returns in the five-day window after the trade are positive (negative). We also find that while the product of the net buys (sells) and the price change over the five-day window after the trade for small trades in the post-EDGAR period is still less than that for large trades, the difference between the two groups decreased significantly. Consequently, while we cannot directly examine the profitability of these transactions, the evidence presented is consistent with EDGAR improving the trading outcomes of small vis-a`-vis large investors.

Measuring the usefulness of information publication time to proxy for returns

“…Publications with larger proximity are likely to gain a larger reaction amongst investors rather than publications with smaller proximity to the publication's regulated deadline. These results align with previous research conducted on the US market: significant market reactions to SEC form 10-K early filings were indicated in several studies [Qi, Woody, and Haw 2000;Asthana and Balsam 2001;Griffin 2003;Asthana, Balsam, and Sankaraguruswamy 2004].…”

Wake up or fall asleep-value implication of trusted computing

“…4.1.2.1 Abnormal trading volume Following previous literature [44], based on daily trading volume data from The Trade and Quote, we estimated abnormal total trading volume as follows:…”

“…In this section, we measure relative trading activity among different investor groups in response to TC technology adoptions using the relative abnormal volume, the relative abnormal number of transactions, and the mean transaction-size. Following prior literature, we use both transaction size [40] and the dollar value of transactions [44] to proxy for investor type and wealth.…”

The Effect of Shortened Reporting Lag on the Usefulness of Form 20-F

“…In the post-EDGAR era, where free online access is available for 10-K and 20-F filings one day after being filed, recent studies (e.g. Qi, et al, 2000;Griffin, 2003;Asthana et al, 2004;You and Zhang, 2009;Christensen et al, 2013) provide consistent evidence that 10-Ks provide investors with useful information and market participant trade using these pieces of information. More specifically, Callen et al (2006) find that news about expected returns, accruals, and cash flows contribute to some of the stock price adjustments upon 10-K releases.…”

“…include Leverage as the ratio of total liability to total assets, and MTB as the market-tobook value, calculated as the ratio of market value to book value (Asthana et al, 2004). reaction.…”