Does the Readability of Target Firm’ Annual Reports Matter to Bidders?

This study investigates value-relevant implications of target-firm annual report readability for acquiring firms. We document robust evidence that readability has a positive association with bidder market reaction. This finding is more pronounced among firms with higher levels of opacity, lower analyst following; bidders with lower managerial ability; and less reputed M&A advisors. Further, in terms of other M&A outcomes, readability has a positive association with the bid premium and long-term bidder performance, and a negative association with the time to complete the M&A. Overall, these findings indicate that markets do value the readability of target 10-K filings – readability does matter to bidding firms.