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

• In Event: Information Usefulness

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, while no significant change in market reaction is detected for medium and small firms. I also find that the market did not appear to have reacted to firms who voluntarily further shortened their 20-F reporting lag to less than four 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 their financial statements, but the 20-F readability and the possibility of amending their 20-Fs do not seem to be different, compared to the matched non-acceleration firms. Taken together, this study provides consistent evidence suggesting that a uniform “four-month” 20-F filing deadline is only beneficial for large firms while causing no burdens to medium and small firms, and that the accelerated 20-F filing deadline may increase the timeliness of 20-Fs at the expense of the reporting quality.

Authors

• Zhenfeng Liu, University of Michigan-Flint

• Stephen Wen-Jen Lin, Florida International University

• Yicheng Kang, Bentley University