Are Investor Reactions Shaping Sec Filings Writing?

Abstract

This study examines whether companies consider investor reactions when reporting information to the SEC. We rely on M&A decisions as a testbed for two main reasons: (i) these are associated with announcement dates allowing the isolation of investor reactions and (ii) they require filing well defined SEC forms after the deal announcement. Relying on a large sample of hand collected merger-related SEC filings, we perform textual analysis to measure their readability (i.e., the Fog index). We find evidence about the existence of a feedback effect from investor reactions to the readability of the SEC filings and to the timing of its reporting to the SEC, supporting the presence of strategic behaviors in SEC filings information disclosure. The results indicate that more negative investor reactions are associated with less readable SEC filings and faster reporting.