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

• In Event: Disclosure Quality

Abstract

This study examines the impact of the Securities and Exchange Commission’s (SEC) decision to accelerate the Form 20-F (20-F) filing deadline on the informativeness of 20-Fs. I find that only the large firms experienced a significant increase in market reaction when they accelerated their 20-F filing deadlines to four months after the year-end. In contrast, the medium and small firms experienced a significant reduction in market reaction to the accelerated 20-F filing deadline. I also find that the market does not appear to have reacted to firms who voluntarily shortened their 20-F reporting lag from four months (or less) to even less months after the year-end. Finally, I find that firms that comply with the SEC’s policy to shorten the 20-F filing deadlines are more likely to restate and amend their 20-Fs subsequently and to have lower 20-F readability, compared to the matched non-acceleration firms. Taken together, this study provides consistent evidence suggesting that a uniform 20-F filing deadline does not fit all firms of different sizes, and that the accelerated 20-F filing deadline may increase the timeliness of 20-Fs at the expense of the reporting quality.

Author

• Zhenfeng Liu, Florida International University