The Use of EDGAR Filings by Investors

Using data from the Security and Exchange Commission's Electronic Data Gathering and Retrieval (EDGAR) server log, the authors examine the consumption of financial information in filings from 2003 to 2012. The EDGAR filings represent a first-source database for investors doing fundamental research on stock valuations. The magnitude of daily EDGAR requests for 10-Ks is surprisingly low and shows only a small difference between firms with and without publicly traded equity. The average publicly traded firm has their annual report requested only 28.4 total times by investors immediately after the 10-K filing. The lack of annual report requests suggests that investors generally are not doing fundamental research on stocks.     

Factors associated with price reactions and analysts’ forecast revisions around SEC filings

We investigate the extent to which rapid accessibility of financial reports filed electronically through the Securities and Exchange Commission’s EDGAR system has affected the ability of investors and security analysts to use accounting data in pricing decisions and forecasting. Consistent with prior research, we find evidence confirming that stock price reactions to SEC filings are significant in the EDGAR period but not the pre-EDGAR period. We also find significant revisions in analysts’ one-quarter-ahead earnings forecasts around SEC filings dates in both the pre-EDGAR and EDGAR periods. The price and forecast revision evidence indicates that financial analysts have used SEC filings all along. However, it is the advent of EDGAR that has allowed individual investors to also use 10-K and 10-Q filings. Cross-sectional analyses indicate that in the EDGAR period, trading volume around the preceding earnings announcements may influence individual investors to react to SEC filings. In contrast, variables such as the earnings surprise and the level of total accruals attract the attention of financial analysts. Interestingly, analysts appear to have been less likely in the pre-EDGAR period to bear the cost of searching out each SEC filing to identify those with large total accruals, which are known only after examining the SEC filing itself.     

Run EDGAR Run: SEC Dissemination in a High‐Frequency World

We describe the process through which the Securities and Exchange Commission (SEC) makes filings “publicly available.” For a sample of Form 4 (insider trade) filings, we show that, during the period we examine, the majority of filings are available to paying subscribers of the SEC's public dissemination system (PDS) feed before they are posted to the EDGAR website, and so provide subscribers and their clients with a private advantage. We show that this advantage translates into an economically significant trading advantage, and prices, volumes, and spreads respond to the news contained in filings beginning around 30 seconds before public posting. These findings indicate that the SEC dissemination process does not always provide a level playing field and that the meaning of publicly available information in capital markets is no longer simple or obvious. In response to our study, the SEC launched an investigation and agreed to eliminate the PDS timing advantage.     

The economics of misreporting and the role of public scrutiny

This paper examines how the ex ante level of public scrutiny influences a manager's subsequent decision to misreport. The conventional wisdom is that high levels of public scrutiny facilitate monitoring, suggesting a negative relation between scrutiny and misreporting. However, public scrutiny also increases the weight that investors place on earnings in valuing the firm. This in turn increases the benefit of misreporting, suggesting a positive relation. We formalize these two countervailing forces–“monitoring” and “valuation”–in the context of a parsimonious model of misreporting. We show that the combination of these two forces leads to a unimodal relation. Specifically, as the level of public scrutiny increases, misreporting first increases, reaches a peak, and then decreases. We find evidence of such a relation across multiple empirical measures of misreporting, multiple measures of public scrutiny, and multiple research designs.     

Got Information? Investor Response to Form 10-K and Form 10-Q EDGAR Filings

This study examines the investor response to Form 10-K and 10-Q reports filed between 1996 and 2001. The samples comprise essentially the entire body of EDGAR filings, including the small business (SB) versions of each filing type. The study documents that the absolute value of excess return is reliably greater on the day of and on the one or two days immediately following the filing date. The response is stronger around a 10-K date than a 10-Q date, more elevated for delayed filers, and increases significantly over the study period for both filing types. A regression analysis indicates that differences in response due to filing delay and year of filing are not subsumed by other attributes of the information environment, such as changes in industry composition, day of week, market capitalization, and shares held by institutions.     

The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation

Using the implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system from 1993 to 1996 as a shock to information dissemination technologies, we examine how a significant reduction in disclosure processing costs affects the real economy. We find that the EDGAR implementation leads to an increase in corporate investment and that this effect is concentrated in value firms. We provide evidence that improved equity financing and enhanced managerial incentives are likely the underlying mechanisms. Specifically, the EDGAR implementation leads to an increase in a firm's stock liquidity, a decrease in the cost of equity capital, and an increase in the level of equity financing. Consistent with the monitoring effect of broad information dissemination, the EDGAR implementation leads to an increase in a firm's operating performance. Our findings suggest that it is important to consider information dissemination beyond information production when examining the real effects of corporate disclosures.