The effect of EDGAR on the market reaction to 10-K filings

This paper examines the impact of making accounting information available on the Internet simultaneously and almost costlessly to all market participants. More specifically, we examine if filing form 10-K on EDGAR has any effect on the information dissemination process when compared to the traditional method of filing. We examine a random sample of firms that file on EDGAR for the first time and compare the market response to their 10-K filing to that of the previous year's filing which was not on EDGAR. Consistent with the preexisting literature, we do not find a market reaction to the pre-EDGAR filing. In contrast, we find both a price and volume reaction to 10-K's filed on EDGAR. We perform a variety of univariate and multivariate tests to ensure that our results are not driven by other factors, i.e., firm characteristics and timing of 10-K filings. Overall, we find evidence that the market reacts more significantly to 10-K's filed on EDGAR. In our multivariate tests we also examine whether the EDGAR effect is more important for certain types of firms. Consistent with our expectations, we find the EDGAR effect is smaller for faster growing firms for which we believe there are more non-EDGAR sources of information. Finally, we document that, on average, 10-K's filed on EDGAR are filed earlier than 10-K's filed under traditional methods.