Decision Usefulness and Accelerated Filing Deadlines

Jeffrey T. Doyle
Jon M. Huntsman School of Business
Utah State University
3540 Old Main Hill
Logan, UT 84322
jeffrey.doyle@usu.edu

Matthew J. Magilke
Robert Day School of Economics and Finance
Claremont McKenna College
Claremont, CA 91711
mmagilke@cmc.edu

December 1, 2012

Accepted by Abbie Smith. We would also like to acknowledge the contributions of an

anonymous referee, Vicki Dickinson, Rachel Hayes, Sarah McVay, Marlene Plumlee, Scott
Schaeffer, and workshop participants at the University of Utah, and Utah State University.

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ABSTRACT: In this study we examine the impact of the SEC’s decision to accelerate
the filing of 10-Ks. The SEC argued that the accelerated deadline would increase the
relevance of the disclosures, making the reports more useful. Opponents countered that
the accelerated deadline would decrease the representational faithfulness of the
disclosures, especially for smaller firms. We document a significant decrease in the 10-K
market reaction for smaller firms as they accelerate from 90 to 75 days. For larger firms
we find no significant change in the market reaction from 90 to 75 days. However, as
these larger firms accelerate their 10-K deadline to 60 days, we find a significant increase
in the market reaction. We also examine changes in reporting quality, shifts in
information content, and changes in 10-K filing order and clustering and find results that
are consistent with accelerated filing having significant impacts on representational
faithfulness and relevance.

2
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1. Introduction

In this study, we examine the impact on overall usefulness to investors of the

Securities and Exchange Commission’s (SEC) decision to accelerate the deadline for

filing form 10-K. Effective for fiscal years ending after December 15, 2003, the SEC

accelerated the deadline for filing the annual 10-K report from 90 to 75 days for certain

“accelerated filers” (generally public firms with a market capitalization of at least $75

million). In addition, the SEC further accelerated the deadline for filing the annual 10-K

report from 75 to 60 days for “large accelerated filers” (those firms with a market

capitalization of at least $700 million) for fiscal years ending after December 15, 2006.1

In implementing the accelerated deadline, the SEC’s focus was on “improving the

usefulness of periodic reports to investors.” (SEC [2002]). The SEC further stated that

accelerating the reports would enable investors to “make more informed investment and

valuation decisions more quickly” due to the increased timeliness of the disclosed

information. These statements are consistent with the FASB’s Conceptual Framework,

which includes timeliness as an enhancing characteristic of information (and hence, a

factor of overall decision usefulness). Although timeliness alone does not necessarily

make information useful, “the older the information is, the less useful it is.” (Statement of

Financial Accounting Concepts No. 8 [2010]).

However, increased timeliness can also result in decreased representational

faithfulness, which may decrease the overall usefulness of the reports. As stated in SFAC

1
For further explanation of these accelerated deadlines, see SEC Final Rule 33-8128 (issued on September
5, 2002) for the initial acceleration requirements and SEC Final Rule 33-8644 (issued on December 21,
2005) for the revised acceleration requirements. The SEC also accelerated the filing of 10-Qs from 45 to 40
days for fiscal quarters ending on or after December 15, 2003. Due to methodological issues, our tests for
10-Qs were rather limited. In those tests we generally find no significant effect for accelerated filings. We
discuss 10-Qs in Section 5.

1
No. 8, “Sometimes, one enhancing qualitative characteristic may have to be diminished

to maximize another qualitative characteristic.” The most common concern expressed by

opponents to the SEC’s proposal “was that the proposed deadlines would negatively

affect the quality and accuracy of reports.” (SEC [2002]). Hence, shorter deadlines may

result in financial information with less representational faithfulness (i.e., information

that has contains errors, is biased, and/or is incomplete), outweighing any potential

benefits of increased timeliness, and decreasing the overall usefulness of the information.

Our primary purpose in this study is to examine the overall effect of accelerated filing

deadlines on decision usefulness and thus shed empirical light on the 10-K-acceleration

debate over the tradeoff between timeliness and faithful representation.2

In order to capture the impact of acceleration on the overall usefulness of 10-K

filings (i.e., the benefits of increased timeliness, less the costs of decreased

representational faithfulness) we focus on the absolute value of the three day market

reaction to the 10-K filing. Using a matched-sample design, we identify firms that were

subject to the accelerated deadline and match these firms, based on industry, size and

year, to a set of firms that did not accelerate their 10-Ks in the same year. We then

compute firm-level differences in the absolute market reaction for each firm from the pre-

acceleration year to the acceleration year and compare the difference for the acceleration

group to its matched non-acceleration sample.3 We divide the sample by market

capitalization at $700 million, since the large accelerated filers were subject to the

2
As discussed by Schipper and Vincent [2003], separating decision usefulness into its separate components
(such as relevance and reliability) can be empirically problematic. As a result, our study initially focuses on
overall decision usefulness (i.e. the net effect of relevance and faithful representation) rather than trying to
separate it into its individual components. However, we also perform tests that examine the constructs of
faithful representation and relevance separately.
3
Using firm-level changes allows us to use each firm as its own control, thus lessening the impact of
omitted correlated variables in a cross-sectional analysis.

2
acceleration to 60 days in 2007. This also allows us to separately examine the smaller

accelerated filers to see if they were differentially affected by the acceleration to 75 days.

We find that small accelerated filers experience a significant decrease in the 10-K

market reaction from the pre-acceleration year to the acceleration year of -0.78%, relative

to the matched sample that did not accelerate their filings. This suggests that, for smaller

firms, the costs of decreased representational faithfulness outweighed the potential

benefits of increased timeliness for market participants.4 For the large accelerated filers

from 90 to 75 days, we find almost no difference in market reaction for either the

accelerated filers or the matched sample. Thus, for the 10-K change from 90 to 75 days, it

appears there were no net increases in usefulness from accelerated filings for larger firms.

For those firms that further accelerated their 10-K filings to 60 days, we find a

significant increase in the 10-K market reaction of 0.46%, relative to the matched sample

that did not accelerate their filings. These differential findings for large accelerated filers

could be because it took some time to “work out the kinks” in accelerating 10-K

deadlines (i.e., reporting quality issues) or it could be that the additional 15 days to the 60

day deadline provided more incremental benefits from increased timeliness.

As much of the opposition to the accelerated deadlines was from smaller firms,

we explicitly test the difference in the change in usefulness for small accelerated firms

versus large accelerated firms for the 90 to 75 day change. We find that the change in

market returns is 0.71% higher for large accelerated firms, which is both statistically and

economically significant. These results are consistent with smaller firms struggling to

4
Note that the decrease of 0.78% is quite economically significant when compared to the mean market
reaction in the pre-acceleration year for all 10-Ks of 3.4%.

3
implement the accelerated deadline and gives support for the SEC’s subsequent decision

to rescind the requirement for smaller firms to further accelerate to 60-days.

In addition to our primary tests on overall decision usefulness, we perform

analyses to help put those results in context and further investigate the separate constructs

of faithful representation and relevance. First, we find that firms that accelerated from 90

to 75 days (both small and large) experience significant decreases in reporting quality

from the pre-acceleration year to the acceleration year.5 In contrast, we find that the

reporting quality actually increased for large filers accelerating to 60 days. These

additional tests validate and are consistent with our tests on overall decision usefulness.

Next, consistent with the logic behind the SEC’s argument for increased relevance

due to timelier reporting, we find a decrease in information content from the 15-day

period prior to the 10-K filing in the pre-acceleration year to the same calendar period in

the acceleration year. This finding is consistent with the idea that the accelerated filing

deadlines have the effect of reducing information content from private sources and

shifting it to a public filing (e.g., the 10-K report). In addition, firms that accelerate their

filings significantly increase their relative filing position within their industry, potentially

increasing the relevance of those reports. We also find significant increases in clustering

(i.e., filing the 10-K on the same date as other firms) for firms accelerating from 90 to 75

days, but not for firms accelerating from 75 to 60 days. This “information overload” story

also helps explain our differential results on overall decision usefulness.

We believe this study makes several important contributions. We provide

empirical evidence that sheds light on the debate leading up to the SEC’s decision to

5
We use restatements, Dechow and Dichev (2002) residuals, and discretionary accruals as our measures of
reporting quality.

4
accelerate the filing deadline for mandatory periodic reports. While the SEC claimed that

the usefulness of the reports would increase, many critics argued that the reports would

be less reliable and potentially less useful overall, especially for smaller filers. Despite

the huge impact of accelerated filing deadlines on financial reporting (affecting two-

thirds of all firms listed on Compustat, or a full 99.7% of the total market capitalization

of Compustat firms), almost no empirical analysis of the costs and benefits has been done

by the SEC or by academics. To our knowledge, we are not aware of any paper that

examines the net benefits of a mandated increase in financial reporting timeliness. In a

concurrent study, Bryant-Kutcher et al. [2012] examine whether accelerated filing

deadlines are associated with an increase in the likelihood of restatements. While they

find evidence of an increase in restatements for mandatory accelerated filers, their study

focuses solely on the potential costs of mandated changes in timeliness – just one element

of a more complete cost/benefit analysis. Our research design (using a within-firm

change analysis with a matched control sample) provides a powerful test that takes

advantage of a natural experimental setting where firms mandatorily accelerated their

filings, while a matched sample did not accelerate their 10-Ks during the same period

(i.e., many firms were already in compliance before the mandatory deadline). This

created a natural control group of firms that were not affected by timeliness issues, but

were subject to the same general changes in the overall information environment.

Finally, in addition to those who participated in the debate over accelerated filing

deadlines, including the SEC, firms subject to the requirements, auditors, and other users

of 10-Ks, our results should be of interest to academics who are interested in the

fundamental tradeoff between relevance and faithful representation in financial reports.

5
2. Institutional Background and Hypotheses Motivation

As mentioned previously, in 2002, the SEC accelerated the deadline for filing the

annual 10-K report from 90 to 75 for certain accelerated filers for fiscal years ending

after December 15, 2003 (SEC 2002). Originally, the SEC required the further

acceleration of 10-Ks to 60 days for all accelerated filers. However, in 2005, the SEC

decided to apply the 60 day 10-K requirement to only large accelerated filers (generally

those firms with a market capitalization of at least $700 million) for fiscal years ending

after December 15, 2006 (SEC [2005]). In modifying its original acceleration

requirements, the SEC “acknowledged the need to balance the demand for timely

information to investors with the time companies need to prepare their reports without

undue burden.” (SEC [2005]). Hence, from the beginning the SEC recognized the need

for a balance between timeliness and faithful representation.

In making the decision to accelerate periodic filings, the SEC indicated that more

timely reports “may increase the relevance of these reports, as the timeliness of

information has considerable value to investors and the markets.” (SEC [2005]). The

second part of this statement is borne out by several recent studies that have examined the

information content or usefulness of 10-K filings. Qi et al. [2000], Asthana and Balsam

[2001], Griffin [2003], and Asthana et al. [2004] document significant market reactions

to 10-K filings. Qi et al. [2000] and Asthana and Balsam [2001] find no evidence of

incremental information content in pre-EDGAR 10-K filings in relatively small samples.

However, they do find significant market reactions to 10-K filings which were filed on

EDGAR.6 Griffin [2003] extends Qi et al. [2000] and Asthana and Balsam [2001] by

6
Pre-EDGAR studies (EDGAR is the SEC’s Electronic Data Gathering, Analysis, and Retrieval system
which was started in 1994 and fully implemented by 1997), including Foster and Vickrey [1978], Foster et

6
documenting similar findings in a much larger sample. Complementing these results, De

Franco et al. [2011] find that the source of 10-K usefulness is partially attributable to

detailed footnote information, which they show are used to calculate accounting

adjustments used by equity analysts.7

Given that 10-Ks have incremental information content, it seems plausible that

accelerating the release of this information would increase its relevance by preempting

other news sources or by allowing for greater use of the information on a more timely

basis (e.g., for comparative purposes with other similar firms, etc.).8 However, as

indicated earlier, it is unclear how the acceleration process affected the reporting quality

of the reports. A common concern by opponents of the acceleration process was that “the

proposed deadlines would impair the ability of management, external auditors, boards of

directors and especially audit committees to scrutinize and review filings properly…”

(SEC [2002]). Of the 302 comment letters received by the SEC for the original

acceleration proposal, 282 were opposed, and most of these voiced concerns related to

reporting quality issues. Thus, our primary objective in this study is to empirically test the

SEC’s assertion that the acceleration of periodic reports would increase their overall

usefulness. Our first hypothesis is as follows:

H1: The accelerated filing of 10-Ks resulted in increased overall usefulness to market
participants.

al. [1983], Stice [1991], and Easton and Zmijewski [1993] generally find limited or no evidence of
incremental information content for 10-K filings. Except for Easton and Zmijewski [1993], these studies
were limited by their relatively small sample sizes.
7
In untabulated results we also find significant mean market reactions to 10-K announcements (when
compared with a non-event window return) in 10 out of 12 years from 1996 to 2007.
8
Some earlier studies have examined the impact of timeliness of earnings announcements on stock returns.
Givoly and Palmon [1982] find an inverse relation between information content and timeliness. However,
Chambers and Penman [1984] find no relation between the variability of stock returns and timeliness.

7
 In revising the acceleration requirements in 2005, the SEC acknowledged the

potential differential effect of the requirements on smaller firms. It stated that, “Smaller

companies appear to have access to fewer financial resources and less well-developed

infrastructure to support the further acceleration of the reporting deadlines. For a given

disclosure, diseconomies of scale may cause smaller companies to face greater costs of

acceleration than larger companies.” (SEC [2005]). Hence, we explore how firm size may

affect the overall usefulness as reports are filed on a timelier basis.

Given the SEC’s statement above, and its elimination of the requirement for

smaller firms (those with a market capitalization less than $700 million) to accelerate

their 10-Ks to the 60 day deadline, we hypothesize that smaller firms may have more

difficulty in complying with the accelerated filing deadline. Fewer resources (e.g.,

personnel), less internal expertise, and less timely access to external auditors may lead to

a decrease in the usefulness of accelerated filings. Our formal hypothesis is as follows:

H2: The accelerated filing of 10-Ks for smaller firms resulted in less overall usefulness
to market participants than for larger accelerated firms

In addition to our first two general hypotheses, which focus on the overall

changes in decision usefulness, we also investigate other related hypotheses to separately

explore expected changes in faithful representation and relevance due to accelerated

filing deadlines. These tests help put our general results from H1 and H2 in context and

give added assurance that we are capturing the effects of accelerated deadlines, rather than

some other unrelated phenomenon. We begin by investigating what is happening to the

content of the 10-K reports themselves as a result of the accelerated filing deadlines. As

noted above, the major concern expressed by those opposed to accelerated filing deadlines

was that the quality of those reports would decrease. If firms have less time to file their

8
reports, it is possible that the preparation and review of these reports will not be as thorough,

which could result in several problems. First, firms may be less able to make accurate accrual

estimates, especially if these estimates use information subsequent to the fiscal year end in

their calculations. In addition, as shown by De Franco et al. [2011], 10-Ks contain detailed

footnote information that is used by market participants. Given that this footnote information

is complicated and time consuming to create, accelerated filing deadlines may reduce the

quality of the information in the 10-K. Second, with less preparation time, it is possible that

internal and external auditors will have less time to properly review the financial statements

and footnotes. This could lead to an increase in both unintentional and intentional

financial statement misstatements (i.e., more errors and biased reports/earnings

management). If these misstatements are serious enough, this could lead to an increase in

restated financial statements. Our general reliability hypothesis is as follows:

H3: The accelerated filing of 10-Ks resulted in lower quality financial reporting

Our next hypothesis relates to an information shift associated with an accelerated

deadline. In the pre-acceleration period, private information is being gathered and

impounded in stock prices up to the filing of the 10-K. If this private information is a

substitute for information in the 10-K, it will preempt the 10-K and reduce the new

information conveyed to the market at the release of the 10-K (i.e., the 10-K market

reaction will be smaller). A possible effect of an accelerated 10-K filing deadline is that

the market response to this preemptive private information will now be captured by the

timelier 10-K release. In other words, if the filing is accelerated 15 days, we would

expect to see an information timing shift from the 15 days prior to the non-accelerated

9
10-K filing to the accelerated 10-K release date.9 Thus, we hypothesize that the total

information content of the 15 day period prior to the 10-K filing in the non-accelerated

period will decrease compared to the same exact period in the subsequent, accelerated

year. This shift in information would support the idea that accelerated deadlines cause

stronger market reactions to 10-Ks in the acceleration period.

H4: The accelerated filing of 10-Ks resulted in lower total information content for the
15-day period preceding the non-accelerated 10-K filing date, compared to the same
calendar period in the subsequent accelerated year.

Our final two hypotheses relate to the position of the 10-K filing date, compared

with other firms. Prior research has shown that information transfer occurs between firms

(Freeman and Tse [1992], Han and Wild [1990]). For example, if Firm A reports before

Firm B, then some of the information about Firm B is revealed by Firm A’s report and is

impounded in Firm B’s stock price (e.g., Firm A’s 10-K might preempt some of the

information content of Firm B’s 10-K). If Firm B accelerates its filing, and now reports

before Firm A, then this would explain an increase in the information content of Firm B’s

report. As a result, we examine the relative filing position of accelerated filers in the pre

and post periods. We hypothesize that the relative filing position will increase for

accelerated filers. Although this test is one-sided in nature (since accelerated firms are

unlikely to decrease their filing position), we are primarily interested in the magnitude of

this shift. A large shift in the relative filing position for accelerated filers will help

explain why we might find increased informativeness of 10-K filings for these firms.

In addition to the changing filing order of firms, we note that a decreased number

of days for filing the 10-K after the fiscal year-end will likely result in an increased

9
There are also other possible consequences of a reduction of private information gathering due to an
accelerated public filing. We discuss the potential impact of reduced private information on investor
uncertainty and information asymmetry in Section 5.1.

10
clustering of 10-K filings on particular dates. Hirshleifer et al. (2009) examine earnings

report clustering and find that high levels of clustering results in lower market reactions

to reports, due to investor distraction. Once again, although this test is somewhat one-

sided as well (as the shortened filing period is unlikely to result in lower clustering), a

finding of large increases in 10-K clustering may help explain why accelerated 10-K

filings have less information content. These final two hypotheses are stated below:

H5a: The accelerated filing of 10-Ks resulted in an increase in the relative filing order
for these firms.

H5b: The accelerated filing of 10-Ks resulted in an increase in the clustering of 10-K
filings for these firms.

3. Research Methodology

We begin by collecting all 10-K filing dates from EDGAR for filing years 2003

through 2007.10 We are primarily interested in the filing years 2004 through 2007, as

these are the years when firms are required to accelerate their filings. We also collect

additional data for 2003, as this is our initial pre-acceleration year. The filing dates allow

us to calculate FilingDays for each firm year, which is the number of days after each

company’s fiscal year end that the 10-K is filed with the SEC.

Next, consistent with Francis et al. [2002] who examine the usefulness of earnings

announcements over time, we use abnormal returns (from CRSP) to measure the overall

usefulness of 10-K filings. Since we are concerned with the magnitude of usefulness

regardless of whether the news is good or bad, we use the absolute value of abnormal

10
We exclude 10-KSBs as the accelerated filing deadline generally does not apply to them.

11
returns cumulated over the three day window starting on the 10-K filing date (day 0)

through day +2.11 Stated formally, MktReaction is calculated as follows:

MktReactioni = |Σ(Ri – Rp)| (Eq. 1)

where Ri is the firm’s raw three day return and Rp is the mean three day return for the

size-decile portfolio to which the firm belongs at the beginning of the year.12 Note that

this measure captures the incremental overall usefulness of the 10-Ks, rather than the

separate components of relevance and faithful representation. Since we are interested in

the impact on accelerated filing deadlines from a pre-acceleration period to the

acceleration period, we use a change analysis to create a more powerful test. Hence, our

primary tests use the change in MktReaction from the pre-acceleration year to the

acceleration year. If the accelerated 10-Ks are more useful to investors, we would expect

the change in MktReaction to be positive.

One problem with using the market reaction to 10-K filings as our measure of

usefulness is that earnings for the fourth quarter are often announced on or near the same

day. As Li and Ramesh [2009] document, the relative timing of these two important

disclosures can influence their respective informativeness. This problem is exacerbated in

our time period, since the 10-K filing date has been accelerated to when firms generally

issue a press release with the fourth quarter results. Because we want a clean 10-K market

reaction window so as not to contaminate 10-K market reactions with earnings

11
Griffin [2003] documents the largest market reactions to 10-Ks during days 0 to +2. Hence, we focus on
days 0 to +2 rather than days -1 to +1 to better capture 10-K usefulness.
12
Note that we use unscaled abnormal returns, similar to those used in Francis et al. (2002). Many other
recent papers examining 10-K reactions scale the returns by the standard deviation of abnormal returns
(e.g., Asthana and Balsam [2001], Griffin [2003], Bryant-Kutcher et al. [2008], and Li and Ramesh
[2009]). We choose to use unscaled returns in our primary analysis to create a more intuitive and
straightforward measure and to avoid problems in creating a proxy that does not represent our theoretical
construct (see Durtschi and Easton [2005]). We discuss scaled results as an additional proxy in Section 5.

12
announcement reactions, we eliminate all observations in either the pre-acceleration or

acceleration year where the 10-K is not filed at least 10 days after the fourth quarter

earnings announcement.13

We next identify firms that filed a 10-K within 70-75 days from 2004 through

2007 and accelerated the filing date by 10 to 17 days from the previous year and have a

market capitalization of at least $75 million. This is our “acceleration” sample. We also

identify all firms from 2004 through 2007 that filed a 10-K within 75 days and had a

change of plus or minus 5 days from the previous year and have a market capitalization

of at least $75 million. This is our “non-acceleration” group of firms. This non-

acceleration group thus consists primarily of firms that were already complying with the

accelerated filing deadline before it was mandatory.14 Documenting a change in

MktReaction within accelerated filers alone is not enough to establish that acceleration

affected the usefulness of 10-Ks. We must show that the change for the accelerated filers

is different than the change for the corresponding group that had no change in the

timeliness of 10-Ks.15

In order to test H1, we compare the within-firm differences in MktReaction for the

acceleration group to the non-acceleration group. Note that using within-firm differences

13
This requirement is significant, as it eliminates 27.8% of our 10-K announcement observations. This
adjustment is not made in either the Griffin [2003] paper, which examines the informativeness of 10-K
announcements, or the Bryant-Kutcher et al. [2008] working paper, which examines the effect of
acceleration on relevance and reliability.
14
Although our control group has its advantages, one problem is that these firms have self-selected to
comply early with the accelerated filing deadline. Thus, these firms could be those that expect higher
benefits and lower costs from acceleration. Likewise, our treatment firms might be those firms that have
lower benefits and higher costs related to acceleration. As such, our information content tests for our
treatment firms may be understating the true net benefits from acceleration from a randomly chosen firm.
This potential endogeneity problem remains as a limitation of our study.
15
In untabulated results, we find that the mean market reaction to 10-K filings from 1996 to 2007 are quite
variable, ranging from 6.4% to 2.1%. This large fluctuation from year to year highlights the importance of
using a within-firm, matched sample design to control for year-over-year changes in market reaction that
are unrelated to the acceleration of 10-K filings.

13
allows us to use each firm as its own control, resulting in a more powerful test than

merely calculating pooled means for the two groups. This methodology also reduces the

threat from firm-level correlated omitted variables. Since the non-acceleration group may

be systematically different than the acceleration group (e.g., firms that have previously

accelerated and are in our non-acceleration group may be much larger, more successful

firms), we choose to use a matched sample test design. For each firm from the

acceleration group, we find a matched firm from the non-acceleration group, based on the

acceleration year, industry (one-digit SIC code), and market capitalization. As our

descriptive statistics show later, this results in two groups of firms with very similar

profiles, with the exception of acceleration. While our within-firm, matched sample

design choice reduces our sample size, it creates a powerful test of whether the

acceleration of 10-Ks resulted in increased overall usefulness, relative to firms that did

not accelerate their filings over the same period.

Although our within-firm, matched sample design helps reduce the threat of

correlated omitted variables, we include additional control variables that may affect the

market reaction to 10-K filings. Since we use a change analysis, each of these variables is

also calculated as a change from the pre-acceleration to the acceleration year. Also,

because our dependent variable measures the change in the absolute value of the market

reaction, we take the absolute value of each control variable in each year and then

compute the difference. All differences are then decile ranked to minimize the influence

of extreme observations.

It is important to note that prior research has not examined what factors influence

the informativeness of 10-Ks. Hence, it is difficult to make predictions about the sign for

14
each of the control variables. While our control variables were chosen in a rather

arbitrary manner, it seems reasonable, for example, that a large change in firm-level

Accruals (income before extraordinary items minus operating cash flows, scaled by

average total assets from Compustat) from the pre-acceleration period to the acceleration

period may have an influence on the change in MktReaction over the same period. The

same argument holds true for the LnAssets (the log of fiscal year end total assets from

Compustat), SpecItems (current-year special items scaled by average total assets from

Compustat), ROA (net income scaled by average total assets from Compustat), and Sales

(total revenue from Compustat; the change is scaled by the prior year’s sales) as these

variables may affect the type of information that is disclosed in a 10-K. We include

AuditFees (total audit fees scaled by average total assets from Audit Analytics) to control

for potential effects on the perception of 10-K reliability and #Words (the number of

words in the 10-K extracted from EDGAR) to control for potential year-over-year

changes in the length of 10-Ks.16

We also include EAInfo (the absolute cumulative size-adjusted return for the

fourth-quarter earnings announcement measured as the difference between a firm’s 3-day

cumulative return on days 0 to +2 and the return for the same period on the market-

capitalization based portfolio decile to which the firm is assigned at the beginning of the

year); EADays (the number of days from the firm’s fiscal year end to the fourth quarter

earnings announcement); #Analysts (the number of analysts providing a fourth quarter

earnings forecast in the current year). We include these variables as additional controls

for potential effects on year-over-year changes in the market reaction to 10-Ks.

16
One limitation of our study is that we do not control for specific information contained in 10-Ks, such as
detailed footnote information (see De Franco et al. [2011]), which may change from year to year.

15
 Finally, we run separate tests for small and large accelerated filers in order to

explore H2. As mentioned earlier, smaller accelerated filers were initially subject to the

60 day filing deadline, but were later exempted. Using the variable MktCap (fiscal year

end stock price multiplied by common shares outstanding from Compustat), and

consistent with the SEC’s definitions, we identify small accelerated filers as those firms

with MktCap greater than $75 million but less than $700 million. Large accelerated filers

are those firms with MktCap over $700 million. We then run our tests for 1) small

accelerated filers for the change from 90 to 75 days, 2) large accelerated filers for the

change from 90 to 75 days, and 3) large accelerated filers for the change from 75 to 60

days. Our final sample consists of 324 small accelerated filers (with 324 matched firms)

for the 90 to 75 day change, 262 large accelerated filers for the 90 to 75 day change, and

201 accelerated filers for the 75 to 60 day change. Our main tests use the following

multivariate regression:17

Δ MktReactiont = γ0 + γ1Accel + γ2ΔAccruals + γ3ΔAuditFees + γ4ΔLnAssets

+ γ5ΔSpecItems + γ6ΔROA + γ7ΔSales + γ8Δ#Words + γ9ΔIntensity
+ γ10Δ#Analysts + γ11ΔEAInfo + γ12ΔEADays + εt (Eq. 2)

4. Descriptive Statistics and Main Results

4.1 Descriptive Statistics

We provide acceleration-year descriptive statistics of key variables for accelerated

filers and their matched sample in Table 1. Recall that the matched sample firms are

matched on MktCap, filing year, and industry. For the matching process to be effective,

17
We modify Eq. 2 to include an additional control for material weaknesses (MatWeak) when examining
the acceleration to 60 days for large firms as Section 404 disclosures applied during this time period.

16
we would hope to see similar characteristics for the sample firms and the matched firms.

We present small accelerated filers (from 90 to 75 days) in Panel A, large accelerated

filers from 90 to 75 days in Panel B, and large accelerated filers from 75 to 60 days in

Panel C. As expected, there are few differences between accelerated filers and the

matched samples with respect to financial data. For the small accelerated filer group, the

matched sample firms have slightly more sales ($353 million to $254 million) and assets

($523 million to $424 million). SpecItems are also slightly lower for the matched sample

compared to the large accelerated filer group in Panel C. While we find no significant

difference in #Analysts, #Words, or OpinionDays for the three groups, we do observe

significant differences in EADays in Panels A and B. For these two groups, accelerated

filers tend to release their fourth quarter earnings announcement later (about four to five

days later, on average) than the matched sample. In Panel B we also find that that the

large accelerated filers’ fourth quarter earnings announcements are slightly more

informative than the matched sample (EAInfo of 0.048 versus 0.039). Overall, it appears

that the matched samples are good control groups, differing primarily in our variable of

interest (i.e., the accelerated status of their 10-Ks). Nonetheless, we control for these

additional variables in our multivariate tests in Tables 3 and 4.18

4.2 Results for Overall Usefulness (H1 and H2)

We begin our main analysis in Table 2 by investigating mean within-firm

differences in MktReaction around the pre-acceleration and acceleration periods. In Panel

18
We also analyze changes in our control variables from the pre-acceleration year to the acceleration year
between accelerated filers and their matched samples. We find only four significant differences for all three
groups. We actually use changes in the control variables in Tables 3 and 4, but use levels in additional
robustness tests.

17
A, we examine small accelerated filers and their matched control group for the change

from 90 to 75 days. For the accelerated filers, we see that the mean MktReaction was

3.5% in the pre-acceleration period, dropping to 2.5% in the acceleration year. This 1%

percentage point decrease is significant with a t-statistic of -3.77.19 Note also that mean

FilingDays (in parentheses below the mean MktReaction) drops from 88.2 days to 74.1

days, showing that we have successfully indentified firms that are accelerating their 10-K

filings. As mentioned before, it is necessary to compare this change in MktReaction to a

control group in order to increase our confidence that the change is attributable to the 10-

K acceleration and not some other change in market reactions to 10-Ks in general. For the

matched sample in Panel A, we see that the mean FilingDays only declines slightly from

73.5 to 72.9 days, confirming that these filers did not accelerate their 10-Ks during the

current year. The mean MktReaction declines from 2.9% to 2.7%, which is statistically

insignificant (t-statistic of -0.59). Thus, relative to the matched sample, the mean

MktReaction for small accelerated filers decreased 0.8% (t-statistic of -3.09). At first

glance, contrary to H1 and the SEC’s assertions, it appears that the increased timeliness

of the 10-K filings for small accelerated filers results in less useful overall information to

market participants. We perform a more formal statistical comparison between the

accelerated filers and their matched control groups in our multivariate regressions in

Table 3.

In panel B, we analyze the change in MktReaction for large accelerated filers for

the 90 to 75 day change. As FilingDays for the accelerated group decreases from 87.1 to

73.6 days, MktReaction drops from 2.3% to 1.9% (t-statistic of -2.29). However, the non-

19
Because many 10-Ks are filed on the same date, we report all t-statistics and p-values based on clustered
standard errors to adjust for lack of independence.

18
accelerated group’s MktReaction also drops by nearly the same amount from 2.2% to

1.9% (t-statistic of -2.02), resulting in an insignificant difference in the differences. It

appears that, relative to the matched sample, there was not much of an effect due to the

accelerated deadlines for the larger firms. Taken together, the results in Panels A and B

for the 90 to 75 day change indicate no increase in overall usefulness due to increased

timeliness (H1) and give some initial support to the idea that smaller firms that

accelerated their filings struggled more with the change than larger firms (H2).

In panel C, we examine the change from 75 to 60 days for large accelerated filers

(recall that this additional acceleration requirement for smaller filers was revoked by the

SEC in 2005). For the accelerated filers, the mean FilingDays drops from 73.4 days to

59.4 days as the mean MktReaction increases from 1.6% to 1.9% (t-statistic of 2.41). In

contrast, for the matched sample, the mean MktReaction drops from 1.9% to 1.6%,

although the change is insignificant (t-statistic of -1.20). Compared to the matched

sample, the change in MktReaction is higher for accelerated filers by 0.6% (t-statistic of

3.57). The evidence in Panel C is consistent with H1 that accelerated filings result in

more useful information to investors.

In order to more formally test the difference between the accelerated filers and the

matched sample, in Table 3 we present multivariate regressions that estimate the effect of

acceleration on the change in MktReaction. We use the indicator variable, Accel, which is

equal to one if the firm is an accelerated filer and zero if the firm is in the matched

sample. The coefficient on Accel captures the marginal difference in within-firm

differences between the accelerated filers and the matched sample firms that had no

change in 10-K timeliness. If the accelerated filing of 10-Ks resulted in an increase

19
(decrease) in market reactions, the coefficient on Accel will be significantly positive

(negative). We also include our control variables, described in Section 3, which attempt

to capture any possible changes in the information environment from the pre-acceleration

year to the acceleration year that might affect the change in MktReaction.

In the first column, we examine the small accelerated filers for the change from

90 to 75 days (similar to Table 2, Panel A). We first estimate a base model (not tabulated)

without control variables (but using the same restricted sample size) and find a

coefficient on Accel of -0.0085, which is statistically significant with a t-statistic of -3.09.

The coefficient on the Accel variable tells us that the change in MktReaction for

accelerated filers is about 0.85% less than the matched sample, and that this difference

between the groups is statistically significant. When we add the control variables in the

full model, we find a similar coefficient on Accel of -0.0078 with a t-statistic of -2.71.

Only one of the control variables is significant (ROA with a t-statistic of 1.99). The

0.78% difference between the groups also seems to be economically significant,

compared to the general level of market reactions to 10-K filings (e.g., an additional

decrease of 0.78% for the accelerated firms represents 22% of the initial year mean

market reaction of 3.5% shown in Table 2). These results suggest that the acceleration of

10-Ks for small firms resulted in a decrease in overall usefulness, which offers no support

for H1 and the SEC’s claim that increased timeliness would outweigh any concerns about

decreased reliability. However, these results are consistent with H2, that smaller firms

would struggle more to comply with accelerated filing deadlines. In addition, the results

provide support for the SEC’s decision to rescind the further acceleration to 60 days for

smaller firms.

20
 In columns 2 and 3, we present the results for large accelerated filers (comparable

to the univariate results in Table 2, Panels B and C). In column 2, we focus on the initial

acceleration to 75 days. In both the base model (not shown) and the full model we find no

significant results for the Accel variable, indicating that the initial acceleration had no net

effect on the change in MktReaction.

We now turn to the results in column 3 for large firms that accelerated the filing

of their 10-Ks to 60 days.20 In the full model we find that the change in MktReaction for

the accelerated filers is 0.46% higher than the matched sample and is significant with a t-

statistic of 3.41. Thus, it appears that the second acceleration from 75 to 60 days for large

filers resulted in increased overall usefulness to investors, supporting H1. The 0.46%

difference between the groups again seems to be economically significant (e.g., an

additional increase of 0.46% for the large accelerated firms represents 29% of the initial

year mean market reaction of 1.6% shown in Table 2). One possibility is that large

accelerated filers struggled to comply with the initial acceleration (no increase in

usefulness from column 2), but, as a result of the initial acceleration, were better prepared

to comply with the acceleration to 60 days.

Next, we turn our attention to a formal examination of H2 in Table 4, which

explores the impact of firm size on the change in market reaction to accelerated filing

deadlines. In the first column, we examine the change from 90 to 75 days for all firms

(combining the small and large firms from columns 1 and 2 of Table 3). Our size

variable, Large, is equal to one if the firm has MktCap greater than $700 million and zero

20
In the full model, we include an additional variable that controls for material weaknesses in internal
control that are required to be disclosed for accelerated filers under Section 404 of Sarbanes-Oxley for
fiscal years ending after December 15, 2004. Of the 402 total firms in the regression, only 17 reported a
material weakness in either year, and none reported a material weakness in both years.

21
otherwise. The main variable of interest is an interaction variable, Large*Accel, which

captures the marginal effect on the change in MktReaction for large accelerated filers. If

H2 is supported, the coefficient on Large*Accel will be positive, indicating more overall

usefulness for large accelerators relative to small accelerators. In support of H2, we find a

positive coefficient on Large*Accel of 0.0071 with a t-statistic of 1.96. So, after the

inclusion of our control variables and the matched sample, the change in MktReaction is

0.71% higher for large accelerated filers than small accelerated filers. Thus, we find some

support for the SEC’s decision to exempt smaller firms from the 60-day requirement.

In the second column of Table 4, for the change from 75 to 60 days for large

accelerated filers, we change our definition of Large to be the quintile ranking of MktCap

(since all firms in this column have MktCap greater than $700 million). The coefficient

on Large*Accel is now negative and insignificant with a t-statistic of -1.52, which is

perhaps not surprising given the lack of variation in MktCap when compared with the

first column. It also seems less likely that firms with a minimum MktCap of $700 million

would face the same kinds of resource limitations as smaller firms when attempting to

comply with accelerated filing deadlines.

Overall, consistent with the objections of the majority of comment letters to the

SEC’s acceleration proposal that emphasized the decrease in reporting quality relative to

the benefits from increased timeliness, we find that smaller firms in particular

experienced a significant decrease in price reaction when complying with the 75 day

requirement. Large accelerated filers also struggled with the initial 75 day acceleration

period (no increase in usefulness), but were more successful with the subsequent 60 day

22
acceleration (a significant increase in usefulness).21 Thus, our results also lend some

support to the SEC’s decision to create the small/large firm distinction and exempt the

smaller firms from the 60-day acceleration requirement.

4.3 Results for Specific Tests on Reporting Quality (H3)

We now attempt to provide some context for the results for H1 and H2 by

examining additional variables related to changes in faithful representation and relevance.

These tests help to open the “black box” of our overall return tests and give additional

understanding about what might be happening as a result of acceleration. We begin

testing of H3 in Tables 5 – 7 by examining changes in three proxies for financial

reporting quality. In general, we expect financial reporting quality to decrease as a result

of acceleration. However, given our overall return test results in Table 2 – 4, we further

hypothesize that the small accelerated filers will have the largest decrease in reporting

quality, while the large accelerated filers from 75 to 60 days will have the smallest

decrease in reporting quality (with the large accelerated filers from 90 to 75 days in

between).

In Table 5, we examine the change in the likelihood of a restatement.22 As

hypothesized, in Panel A we find a fairly large increase in restatements for small

accelerated filers of 3.40%, relative to their matched sample of 0.62% (a relative increase

of 2.78%). The results for large accelerated filers from 90 to 75 days in Panel B are

similar, with accelerated filers experiencing a 3.04% relative increase in restatements. In

21
If the change in market reaction for large accelerated filers is measured for the total acceleration from 90
to 60 days (from 2003 to 2007), the overall change is also positive and significant.
22
Using the restatement file from Audit Analytics, we classify a firm as a restatement firm if the firm
restated its financial statements within 18 months of the original 10-K filing date.

23
contrast, in Panel C we see opposite results, with large accelerated filers from 75 to 60

days actually decreasing the number of restatements from 3.48% to 1.99%, while the

matched sample increased slightly.

In Table 6, we examine changes in accrual quality, which is measured using the

residuals from the Dechow and Dichev (2002) methodology.23 The Dechow and Dichev

measure is especially appropriate in this setting, since we are hypothesizing that

accelerated filing deadlines may increase the likelihood of both unintentional (estimation

errors) and intentional (earnings management) misstatement of accruals. Once again,

small accelerated filers in Panel A have a significant decrease in reporting quality relative

to their matched sample (the change in the DDResidual shows a relative increase of 0.011

with a t-statistic of 2.25). There is no relative difference in Panel B for large accelerated

filers from 90 to 75 days, but for the acceleration from 75 to 60 days in Panel C, we again

observe an increase in reporting quality (the change in the DDResidual shows a relative

decrease of -0.004 with a t-statistic of -1.69).

In Table 7, we examine changes in discretionary accruals.24 Once again, we find

similar results to those in Tables 5 and 6. Both small accelerated firms (Panel A) and

large accelerated firms from 90 to 75 days (Panel B) experience relative decreases in

reporting quality. The change in DiscAccruals shows a relative increase of 0.0058 (t-

statistic of 1.60) in Panel A, and the relative increase is 0.0065 (t-statistic of 2.15) in

Panel B. For the large accelerated firms from 75 to 60 days in panel C, we observe a

23
Accrual quality is measured as the residual from estimating (by industry and year) a regression of
change in working capital on operating cash flows at time t, t-1, and t+1, year-end property plant and
equipment, and change in sales (all variables are scaled by average total assets). A higher residual is
consistent with lower accrual quality. See Dechow and Dichev (2002) for more information.
24
Discretionary accruals are measured as the residual from estimating (by industry and year) a regression
of total accruals (net income – operating cash flows) on change in sales, property plant and equipment, and
return on assets (all variables are scaled by beginning total assets).

24
significant relative increase in reporting quality (the change in DiscAccruals shows a

relative decrease of -0.0075 with a t-statistic of -3.16).

Overall, results in Tables 5 - 7 help explain our return tests in Tables 2 and 3.25

During the initial acceleration, neither small nor large accelerated filers reported

increases in usefulness, which is consistent with the decreases in reporting quality we

find for these two groups. In contrast, large accelerated filers from 75 to 60 days did

experience increases in overall usefulness, which is partially explained by the fact that

these firms did not show any decreases in reliability associated with acceleration (in fact,

Tables 5 – 7 show a relative increase in reporting quality for these firms). It appears that

both small and large firms had difficulty with meeting the initial acceleration to 75 days

(resulting in lower reporting quality), but large firms were more able to successfully

accelerate a further 15 days without a corresponding decrease in reporting quality.

4.4 Results for Specific Tests on Relevance (H4 and H5)

The next three tests help quantify the impact of accelerated filing on the relevance

of those reports. First, in motivating H1 we predict that accelerated deadlines will tend to

increase the overall usefulness of 10-Ks, due to a shift of market-moving information

from the period just prior to the pre-acceleration 10-K filing date (i.e., private information

being gathered that preempts some of the 10-K information) to the accelerated 10-K

25
We did make an attempt to directly relate the changes in reporting quality in Tables 5-7 to the 10-K
announcement returns shown in Table 2, but found no significant results. However, all three of our
reporting quality proxies have a form of look-ahead bias, which makes it nearly impossible for investors to
differentiate cross-sectionally on the basis of reporting quality at the time of the 10-K announcement. In
general, we think that for the small accelerated filers from 90 to 75 days, the market is able to anticipate the
fact that reporting quality will be an issue for these smaller firms. As a result, we observe a general
decreased reliance on the 10-K information across all smaller accelerating firms, resulting in the decreased
information content we observe in Table 2, Panel A. The results in Tables 5-7 corroborate the market’s
“penalty” for these firms after the fact, and demonstrate that the market seems to be at least directionally
efficient in placing less reliance on the information in the accelerated 10-K announcements.

25
filing date. In Table 8, we explicitly test this “information shift” conjecture (our H4). If

we cannot find a shift in information content, it would challenge our interpretation of our

H1 results. We begin by measuring the firm-specific total information content (TIC) in

the pre-acceleration year from days -16 to -2, relative to the 10-K filing date.26 We then

re-measure the firm-specific TIC in the subsequent year for the same exact calendar

dates, which are now after the accelerated 10-K filing (e.g., days +2 to +16). If H4 is

supported, we expect to see a significant decrease in TIC for accelerated filers.

In Table 8, we find evidence to support H4, as each of the three acceleration

groups experiences a significant decrease in the TIC variable. All of these three decreases

are also significant when measured relative to their matched samples. Not only are the

decreases statistically significant, but they are also economically significant. For

example, when the relative change in TIC is calculated as a percent of the pre-

acceleration TIC for the accelerated filers, the decrease represents about 16% (small

accelerated filers), 20% (large accelerated filers to 75 days), and 15% (large accelerated

filers to 60 days). Overall, we interpret the evidence in Table 8 as being consistent with

accelerated deadlines causing a shift in information content, thus potentially increasing

the relevance of the accelerated 10-K filings.

Another interesting aspect of Table 8 is that, while the relative decrease in TIC for

large accelerated filers from 90 to 75 days of -0.035 is much more negative than that for

26
Specifically, TIC is the sum of the absolute value of daily size-adjusted returns, measured as the
difference between a firm’s raw return and the return for the same period on the market-capitalization
based portfolio decile to which the firm is assigned at the beginning of the year. Absolute returns are
summed over the same 15 calendar days in both the pre acceleration period and the post acceleration
period. For example, for firms with a calendar year end that accelerated from 75 to 60 days, TIC is
measured from approximately March 1st to March 15th in both the pre acceleration and post acceleration
period. This period represents the pre-announcement period in the pre-acceleration year (i.e. the 10-K is
typically filed by March 15th) while the same period represents the post-announcement period in the post-
acceleration year (i.e. the 10-K is typically filed by March 1st).

26
the large accelerated filers from 75 to 60 days (-0.017), this “shift” in information does

not seem to show up in the relative 10-K announcement returns in Table 2 (the 75 to 60

day acceleration has a significant relative increase in MktReaction and the 90 to 75 day

group shows no significant change). However, the potential large increase in information

content for the 90 to 75 day acceleration is hampered by the results shown in Tables 5-7.

The concurrent decreases in reporting quality for the 90 to 75 day acceleration appear to

offset the potential advantage shown in Table 8. Although the 75 to 60 day acceleration

doesn’t produce as much of an information shift in Table 8, reporting quality actually

improves at the same time, which explains the overall increase information content for

these firms. It is interesting to note that, for large firms, the first acceleration from 90 to

75 days appears to have produced more benefits and more costs than the second

acceleration from 75 to 60 days. While the 75 to 60 day acceleration produced fewer

benefits than the 90 to 75 day acceleration, it produced them with none of the potential

costs of reduced reporting quality.

We next examine the change in the relative filing order as a result of acceleration.

Again, part of our motivation for H1 is that accelerated filing deadlines will create more

useful reports due to the reduced incidence of competitor filings that preempt information

in the 10-K. As a result, we explicitly test the change in the 10-K filing order in Table 9

(our H5a). We record each firm’s 10-K filing order for each fiscal year and industry (e.g.,

#1 is the first 10-K filed), and then scale that ranking by the total number of firms in that

particular fiscal year and industry group to create our FilingOrder variable.27 If H5a is

supported, we expect to see a significant increase in FilingOrder for accelerated filers.

27
Specifically, FilingOrder is the scaled relative rank order (from 1 to 0) that a firm files its 10-K. Firms
are grouped by two-digit industry code and fiscal year end. The first firm to file a 10-K is assigned a rank

27
 In Table 9, we see that each of the accelerated filing groups significantly increases

their relative 10-K filing order. For small accelerated filers in Panel A, FilingOrder

increases from 0.375 to 0.615, for a change of 0.240 (t-statistic of 21.9). Although we

present the matched sample for informational purposes, we do not perform a statistical

test of the difference in differences, since the two changes are not independent of each

other. We also see similar large increases in FilingOrder in Panel B (0.162 with a t-

statistic of 13.61) and Panel C (0.239 with a t-statistic of 20.82). Although some increase

in FilingOrder is almost inevitable for an accelerated 10-K, the increases in Table 9 are

economically very large (with the average accelerated filer moving past 16 to 24% of the

firms in their industry with the same fiscal year end). As with the TIC evidence in Table

8, Table 9 lends support to the idea that relevance increased as a result of acceleration.28

Our final test examines the change in the number of firms filing a 10-K on a given

day. With fewer days to file the 10-K, it seems likely that the clustering of 10-Ks will

increase as a result of acceleration (our H5b). This increased clustering of 10-K reports

may tend to decrease the relevance due to investor overload (Hirshleifer et al. [2009]). In

Table 10, we calculate Intensity as the number of firms that filed a 10-K on the same date

as the given firm. Thus, an increase in Intensity will support H5b.

of 1. If more than one firm files on the same day, all firms are assigned the same rank (e.g., if two firms are
the first to file on the same day, both firms are assigned a rank of one and all firms that file the next day are
assigned a rank of three). Rank orders are then scaled by the number of firms that filed a 10-K for the same
fiscal year end, and industry. Firms that file their 10-K first are assigned a FilingOrder of 1, while firms
that file their 10-K last are assigned a FilingOrder of zero.
28
To support the notion that filing order is directly related to information content, in untabulated results for
a larger sample of firms from 1999 to 2007 we find a positive relation between the filing order of firms and
10-K market reactions (i.e., the sooner a firm files ahead of its peers, the greater the market response to that
firm’s 10-K reaction). We do attempt to link the filing order changes shown in Table 9 directly to the 10-K
returns shown in Table 2, but do not find significant results, possibly due to the fact that the change in
filing order is only partially affecting the 10-K return, making it difficult to detect this partial effect.

28
 Interestingly, in Table 10 we only find an increase in Intensity for the accelerated

filers in Panels A and B (an increase of 150 for small accelerated filers, t-statistic of

13.43, and an increase of 156 for larger accelerated filers from 90 to 75 days, t-statistic of

11.55). However, for the large accelerated filers from 75 to 60 days, we find almost no

difference in Intensity. For each of the matched samples, Intensity also significantly

increases. However, since the two groups’ changes are not independent of each other, we

once again do not perform a statistical test for the difference in differences. Overall, the

results in Table 10 seem to support our return tests in Tables 3 and 4. Neither small nor

large accelerated filers from 90 to 75 days showed an increase in overall usefulness

(perhaps influenced by the increased clustering of filings), while large accelerated filers

from 75 to 60 days did show an increase in overall usefulness (perhaps aided by the fact

that there was not an increase in clustering for these firms).29

5. Additional Tests

5.1 Accelerated Deadlines and Changes in Private Information

Two other possible changes in the information environment relate to the total

amount of private information embedded in the stock price and the degree of information

asymmetry between informed and uninformed investors. One possible effect of

accelerated filing deadlines is that there will be less time and opportunity for private

information gathering. For example, analysts will have less time to actually do the work

29
As with filing order, to support the notion that filing intensity is directly related to information content, in
untabulated results for a larger sample of firms from 1999 to 2007 we find a negative relation between the
filing intensity of firms and 10-K market reactions (i.e., the more firms that file the 10-K on a given day,
the smaller the market response to the 10-K announcement). We do attempt to link the filing intensity
changes shown in Table 10 directly to the 10-K returns shown in Table 2, but do not find significant results,
possibly due to the fact that the change in filing intensity is only partially affecting the 10-K return, making
it difficult to detect the partial effect.

29
of gathering and creating private information and there will be less opportunity to use

other information sources to create private information. With less total private

information incorporated in the stock price, it is possible that there will be greater overall

uncertainty by investors (i.e., the stock price will be less efficient), resulting in higher

stock price volatility in the post-acceleration period.

Another effect of less private information will be a possible reduction in the

information asymmetry between informed and uninformed investors. If uninformed

investors understand that they are at a relatively smaller information disadvantage in the

post-acceleration period, there may be a decrease in the required amount of price

protection they demand (e.g., bid-ask spreads will decrease).

In untabulated results, we find no differences in the change in the pre-10-K filing

stock price volatility between accelerated filers and their matched samples. Likewise, we

find no differences in the change in bid-ask spreads between accelerated filers and their

matched samples.30 One explanation for our lack of significant results is that 1) the

changes in total private information and/or information asymmetry are too small to have

a measurable effect and 2) investors are not adjusting (or are slow to adjust) their

expectations based on the new information environment caused by accelerated filings.

5.2 Tests for the Acceleration of 10-Qs

In addition to accelerating the deadline for 10-Ks, the SEC also accelerated the deadline

for filing the quarterly 10-Q report from 45 to 40 days for fiscal quarters ending after

30
We measure stock price volatility as the standard deviation of stock returns during the 15 days prior to
day -2 of the 10-K filing date. We measure bid-ask spread as the mean bid-ask spread during the three days
prior to the 10-K filing date. The daily bid-ask spread is calculated as the difference between the asking
price at close and the bid price at close, scaled by the mean of the ask and bid price.

30
December 15, 2003. Originally, the SEC required the further acceleration of 10-Qs to 35

days for all accelerated filers. However, in 2005 the SEC rescinded the 35 day

requirement for all firms.

For our 10-K tests, we use a control sample of firms that did not accelerate their

filings. However, for our 10-Q sample, we do not see nearly as many firms increasing

timeliness prior to the mandated change (i.e., in the same quarter as in the prior year).

This creates a significant problem with respect to identifying an adequate matched

sample of control firms. In addition, if we require that quarterly earnings announcements

occur at least ten days prior to the 10-Q filing date, it eliminates a full 53% of the initial

10-Q sample. Combined, these two requirements leave a potential matched sample of

nine observations. Hence, a dearth of control firms prohibits an examination of the effect

of timeliness on 10-Q filings similar to that of 10-Ks.

However, if we use a non-matched analysis, comparing the average change in

market reaction across each of the three 10-Qs filed in 2003 and 2004, we find that there

is no significant change in the market reaction from 45 days to 40 days for either the

accelerated or non-accelerated firms.31 This may reflect the reduced power of our tests,

the relatively minor change in the filing deadline of 5 days, or the reduced amount of

potentially relevant information in 10-Qs, relative to 10-Ks (see Griffin [2003]).

5.3 Alternative Proxies for Decision Usefulness

As mentioned previously, we use unscaled absolute abnormal returns as our proxy

for overall usefulness of 10-Ks in order to create a more intuitive and straightforward

31
If the 10-Q sample is divided into smaller and larger firms (as with our 10-K tests for the change from 90
to 75 days), the change in market reaction is still insignificantly different from zero for both groups.

31
measure and to avoid problems in creating a proxy that does not represent our theoretical

construct (see Durtschi and Easton [2005]). However, many prior 10-K reaction studies

have scaled abnormal returns by the standard deviation of abnormal returns estimated

during some non-event period to control for changes in stock return volatility over time

(Griffin [2003], Bryant-Kutcher et al. [2008], Li and Ramesh [2009]). To be consistent

with this literature, we estimate an alternative specification wherein we scale

MktReaction by the standard deviation of abnormal returns measured over ten days prior

to the fourth-quarter earnings announcement (i.e., -6 to -15 days). The results for the full

models in Tables 3 and 4 using this scaled measure are qualitatively similar to the results

presented. In sum, it does not appear that scaling issues are driving our results.32

5.4 Other Robustness Tests

If our findings are truly a result of acceleration, we should observe no difference

in market reactions between the same firms (i.e., the accelerated filers and the matched

sample) in the year subsequent to the initial mandated acceleration (e.g., 2004 to 2005).

Hence, we identify the same accelerated filers and matched sample in the year subsequent

to the acceleration year and rerun our tests. With no acceleration now occurring, we find

no statistical difference in the change in MktReaction between the two samples in the

subsequent year. Similarly, we find no significant differences in MktReaction between

our original accelerated groups and the non-accelerated groups in the subsequent year for

large filers for both the 90 to 75 day change and the 75 to 60 day change. These tests

32
In other specifications, we 1) redefine the change in MktReaction by scaling it by the pre-acceleration
year MktReaction (i.e., we make it a percentage change, rather than an absolute change), 2) use raw values,
rather than absolute values when calculating change variables, and 3) use levels, in addition to changes for
our control variables. In all three cases, the results are qualitatively similar to those in our Tables 3 and 4
and yield the same interpretations.

32
provide additional evidence that our primary results are a result of mandated acceleration

and not some other variable that is specific to a given year.33

In addition, in order to provide support that our findings are, in fact, a result of

10-K filings and not the result of luck related to random variation in returns around 10-K

filing dates, we select a random date and re-run our primary tests using the market

reaction for the new date rather than the reported 10-K filing date. We require the random

date to be between 3 and 21 days to reduce the potential for overlap with the first-quarter

earnings announcement. Based on the results of our random-variable generator, we

recalculate MktReaction, starting on day +6 rather than the 10-K filing date.

We re-run our Table 2 tests (results untabulated) and find no significant difference

in differences in MktReaction for any of our three groups of accelerated filers. The fact

that we find insignificant results on a random date, where, in our original tests on the 10-

K filing date, we find significant results (with t-stats > 3.00), provides convincing

evidence that the 10-Ks are providing incremental information to the markets and our

primary results are not a result of random variation in market returns.

6. Conclusion

In this study, we examine the impact of the SEC’s decision to accelerate the

deadlines for filing form 10-K. The SEC argued that acceleration would increase the

33
We also perform subsequent-year tests for our representational faithfulness tests in Tables 5 through 7.
For our small accelerated filers (Panels A of Tables 5-7), we some directional evidence that they “worked
out the kinks” in the subsequent year, but the improvements are not significant when compared to the non-
acceleration control group. We find even stronger evidence that the large accelerated filers to 75 days
improve their reporting quality in the subsequent year. In the subsequent year to the acceleration to 75
days, large firms report lower discretionary accruals and improved accrual quality relative to the control
group. In the subsequent year to the acceleration to 60 days, large firms continue the reduction in
restatements shown in Table 5, Panel C, but show no further improvements in accrual quality or
discretionary accruals.

33
timeliness of the report, making it more relevant and, hence, more useful to investors.

However, many of the SEC comment letters, argued that acceleration would adversely

affect the quality and accuracy of the reports, thus making them less representationally

faithful, and hence, less useful to investors. This paper attempts to provide parties on both

sides of the argument empirical evidence as to the actual effect of acceleration.

We use a matched-sample design with a focus on within-firm changes of absolute

3-day market reactions to 10-K announcements as our primary tests. For the initial

acceleration period from 90 to 75 days, we find a significant decrease (relative to the

matched sample) in overall usefulness for small firms. In contrast, we find no change in

the overall usefulness of 10-Ks for large firms that accelerated to 75 days. For the

subsequent acceleration to 60 days by large firms, however, we find a significant increase

in the overall usefulness of 10-Ks.34

It appears that small firms struggled with the initial acceleration to 75 days, which

is consistent with the SEC’s decision to limit the later acceleration to 60 days to larger

firms. For the larger firms, the initial acceleration to 75 days did not result in increased

overall usefulness, but the second acceleration to 60 days clearly did result in a

significant increase in overall usefulness. It is possible that the “kinks” of filing in a

more-timely manner were worked out during the change from 90 to 75 days (and/or

during the two years following the initial acceleration), resulting in greater net benefits

for the acceleration to 60 days.

34
While we document a significant increase (decrease) in overall usefulness for large (small) firms when
they accelerated their 10-K filings to 60 (75) days, this does not imply there was an increase (decrease) in
welfare. That is, uninformed investors may lose less while informed investors earn less, or vice versa. In
fact, acceleration of 10-Ks may actually crowd out private information search and make stock prices less
informative during the pre-10-K filing period.

34
 In follow-up tests, we attempt to shed light on our overall usefulness results by

examining specific changes in what the FASB’s conceptual framework considers the

primary qualities of decision usefulness: faithful representation and relevance. We

examine three proxies for reporting quality and find results that are consistent with our

overall market reaction tests. For small firms and large firms accelerating to 75 days, we

find a substantial decrease in reporting quality, which is consistent with our finding of no

increases in overall usefulness for these two groups. In contrast, for large firms that

accelerated to 60 days, we find an increase in reporting quality, helping to explain our

finding of increased 10-K usefulness for this group. We also find that accelerated

deadlines shift information from private sources in the pre-acceleration period to the

accelerated 10-K for each of our three groups, significantly increase the filing order (thus

increasing relevance), and increase the clustering of 10-Ks in the acceleration period for

those firms accelerating to 75 days (thus potentially decreasing relevance).

Overall, our study helps to provide empirical evidence as to the effect of

accelerated filing deadlines. Our results should be of interest to the SEC as they provide

support for the decision requiring the majority of firms to accelerate to 75 days and to

exempt small accelerated filers from the 60 day deadline. Our results may also be of

interest to managers and preparers as we document economically significant changes as a

result of more timely filed 10-Ks, thus informing their decisions as to the timeliness of

their information disclosures. Finally, our study should be of interest to academics who

are interested in the fundamental tradeoff between relevance and faithful representation

in financial reports.

35
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Investors to 10-K Filings on EDGAR.” The Accounting Review 79 (2004): 571-589.

Bryant-Kutcher, L., E. Peng and D. Weber. “Relevance, Reliability and the Acceleration of 10-K
Filing Deadlines,” Unpublished paper, Colorado State University, 2008.

Statement of Financial Accounting Concepts No. 8: Chapter 3, Qualitative Characteristics of Useful

Financial Information. Financial Accounting Standards Board, Norwalk, CT, 2010.

Chambers, A. and S. Penman. “Timeliness of Reporting and the Stock Price Reaction to Earnings
Announcements.” Journal of Accounting Research 22 (1984): 21-47.

Dechow, P., and I. Dichev. “The Quality of Accruals and Earnings,” The Accounting Review 77: 35-59.

De Franco, G., M.H. Wong and Y. Zhou. “Accounting Adjustments and the Valuation of Financial
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Durtschi, C. and Easton, P. “Earnings Management? The Shapes of the Frequency Distributions
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557-592.

Easton, P., and M. Zmijewski. “SEC Form 10K/10Q Reports and Annual Reports to
Shareholders: Reporting Lags and Squared Market Model Prediction Errors.” Journal of
Accounting and Research 31 (1993): 113-129.

Foster, T. W., III and D. Vickrey. “The Incremental Information Content of the 10-K.” The
Accounting Review 53 (1978): 921-934.

Foster, T. W., III, R. Jenkins and D. Vickrey. “Additional Evidence on the Incremental
Information Content of the 10-K.” Journal of Business Finance and Accounting 10 (1983):
57-66.

Francis, J., K. Schipper, and Vincent, L. “Expanded Disclosures and the Increased Usefulness of
Earnings Announcements.” The Accounting Review 77 (2002): 515-546

Givoly, D. and D. Palmon. “Timeliness of Annual Earnings Announcements: Some Empirical Evidence.”
The Accounting Review 57 (1982): 486-508.

Griffin, P. “Got Information? Investor Response to Form 10-K and Form 10-Q EDGAR Filings.”
Review of Accounting Studies 8 (2003): 433-460.

Freeman, R. and S. Tse. “An Earnings Prediction Approach to Examining Intercompany Information
Transfers.” Journal of Accounting and Economics 15 (1992): 509-523.

Han, J. and J. Wild. “Unexpected Earnings and Intraindustry Information Transfers: Further Evidence.”
Journal of Accounting Research. 28 (1990): 211-219.

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Hirshleifer, D., S. Lim, and Teoh, S. “Driven to Distraction: Extraneous Events and Underreaction to
Earnings News.” Journal of Finance 64, Issue 5 (2009): 2289-2325.

Li, E. and K. Ramesh. “Market Reaction Surrounding the Filing of Periodic SEC Reports.” The
Accounting Review, forthcoming, 2009.

Qi D., W. Woody and I. Haw. “The Incremental Information Content of SEC 10-K Reports Filed
Under the EDGAR System.” Journal of Accounting Auditing and Finance 15 (2000): 25-46.

Schipper, K. and L. Vincent. “Earnings Quality.” Accounting Horizons 17 (2003) 97-110.

Security and Exchange Commission. Final Rule: Acceleration of Period Report Filing Dates and
Disclosure Concerning Website Access to Reports. Release Nos. 33-8128; 34-46464, File No.
S7-08-02 (2002).

Security and Exchange Commission. Final Rule: Revisions to Accelerated Filer Definition and
Accelerated Deadlines for Filing Periodic Reports. Release Nos. 33-8644; 34-52989, File No.
S7-08-05 (2005).

Stice, E. K. “The Market Reaction to 10-K and 10-Q Filings and to Subsequent Wall
Street Journal Earnings Announcements.” The Accounting Review 66 (1991): 42-55.

37
 Appendix
Variable Definitions

Variable Definition
Income before extraordinary items minus operating cash flows, scaled by
Accruals
average total assets.
The number of IBES analysts providing current-year earnings guidance at
#Analysts
fiscal year end.
Assets Total assets at fiscal year end.

AuditFees Current-year total audit fees, scaled by average total assets.

The number of days from fiscal year-end to the date of the fourth-
EADays
quarter/annual earnings announcement.
The absolute cumulative size-adjusted return for the fourth-quarter earnings
announcement, measured as the difference between a firm’s 3-day cumulative
EAInfo return on days 0 to +2 and the return for the same period on the market-
capitalization based portfolio decile to which the firm is assigned at the
beginning of the year.
LnAssets The natural log of total assets at fiscal year end.
The fiscal year end stock price per common share multiplied by the number of
MktCap
common shares outstanding at fiscal year end.
The absolute cumulative size-adjusted return for the 10-K filing date, measured
as the difference between a firm’s 3-day cumulative return on days 0 to +2 and
MktReaction
the return for the same period on the market-capitalization based portfolio
decile to which the firm is assigned at the beginning of the year.
OpinionDays The number of days from fiscal year end the auditor issued its audit opinion

ROA Current-year net income scaled by average total assets.

Sales Current-year total revenue.

SpecItems Current-year special items scaled by average total assets.

#Words Number of words (in thousands) in the 10-K.

38
 Table 1
Descriptive Statistics of Accelerated Filers and Matched Non-Accelerated Filers
Panel A: Mean Statistics for Small Accelerated 10-K Filers ($75M < MktCap < $700M) from 90 to 75 Days
Accelerated Filers Matched Sample t-stat for
Variables
(N = 324) (N = 324) Difference in Means
MktCap 292 290 0.14
Assets 424 523 1.95*
Accruals -0.040 -0.047 0.87
AuditFees 0.003 0.003 0.67
ROA -0.011 -0.013 0.13
Sales 254 353 2.50**
SpecItems -0.009 -0.013 1.13
EAInfo 0.053 0.054 0.19
EADays 43.12 37.87 5.52***
#Words 61.6 59.9 0.60
#Analysts 2.91 2.73 0.83
OpinionDays 60.4 59.2 0.37

Panel B: Mean Statistics for Large Accelerated 10-K Filers (MktCap > $700M) from 90 to 75 Days
Accelerated Filers Matched Sample t-stat for
Variables
(N = 262) (N = 262) Difference in Means
MktCap 9,652 10,083 0.16
Assets 18,113 17,951 0.02
Accruals -0.053 -0.048 0.68
AuditFees 0.001 0.001 1.07
ROA 0.061 0.066 0.45
Sales 5,632 7,417 1.07
SpecItems -0.009 -0.009 0.20
EAInfo 0.048 0.039 2.32**
EADays 36.336 32.065 4.77***
#Words 84.4 90.4 1.21
#Analysts 9.37 9.71 0.53
OpinionDays 52.1 48.2 1.76*

Panel C: Mean Statistics for Large Accelerated 10-K filers (MktCap > $700M) from 75 to 60 Days
Accelerated Filers Matched Sample t-stat for
Variables
(N = 201) (N = 201) Difference in Means
MktCap 8,324 9,466 0.37
Assets 19,229 13,138 0.77
Accruals -0.045 -0.045 0.01
AuditFees 0.001 0.001 0.17
ROA 0.049 0.062 1.27
Sales 4,947 6,797 0.79
SpecItems -0.011 -0.000 1.83*
EAInfo 0.393 0.343 1.27
EADays 32.54 32.29 0.28
#Words 86.3 87.3 0.19
#Analysts 9.36 9.18 0.31
OpinionDays 57.4 57.5 0.10
* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a two-tailed t-test of means. The non-accelerated matched samples
are matched on MktCap, filing year, and industry in the acceleration year. Variables are defined in the Appendix.

39
 Table 2
Analysis of Changes in Market Reactions to Accelerated 10-K Filings

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M) for 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm
MktReaction MktReaction Difference
(FilingDays) (FilingDays) (t-stat)
Accelerated Filers 0.035 0.025 -0.010***
(N = 324) (88.2) (74.1) (-3.77)
0.029 0.027 -0.002
Matched Sample
(73.5) (72.9) (-0.59)
Test of Difference in -0.008***
Differences (-3.09)

Panel B: Large Accelerated Filers (Mktcap > $700M) for 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm
MktReaction MktReaction Difference
(FilingDays) (FilingDays) (t-stat)
Accelerated Filers 0.023 0.019 -0.004**
(N = 262) (87.1) (73.6) (-2.29)
Matched Sample 0.022 0.019 -0.003**
(69.8) (68.9) (-2.02)
Test of Difference in -0.001
Differences (-0.35)

Panel C: Large Accelerated Filers (Mktcap > $700M) for 75 days to 60 days
Pre-Acceleration Acceleration Within-Firm
MktReaction MktReaction Difference
(FilingDays) (FilingDays) (t-stat)
Accelerated Filers 0.016 0.019 0.003**
(N = 201) (73.4) (59.4) (2.41)
0.019 0.016 -0.003
Matched Sample
(62.4) (60.6) (-1.20)
Test of Difference in 0.006***
Differences (3.57)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a two-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The last column reports the within-firm differences and t-stats for
MktReaction, not FilingDays. The non-accelerated matched samples are matched on MktCap, filing year, and
industry in the acceleration year. MktReaction is the absolute value of the cumulative size-adjusted return, measured
as the difference between a firm’s 3-day cumulative return on days 0 to +2 (days -3 to -1 for preceding three days)
and the return for the same period on the market-capitalization based portfolio decile to which the firm is assigned at
the beginning of the year. FilingDays is defined as the number of days from fiscal year end to the date the 10-K was
filed with the SEC.

40
 Table 3
Multivariate Analysis of Changes in Market Reactions to 10-K Filings
Δ MktReactiont = γ0 + γ1Accel + γ2ΔAccruals + γ3ΔAuditFees + γ4ΔLnAssets + γ5ΔSpecItems + γ6ΔROA
+ γ7ΔSales + γ8Δ#Words + γ9Δ#Analysts + γ10ΔEAInfo + γ11ΔEADays + γ12ΔMatWeak + εt
Small Firms Large Firms Large Firms
Variables
90 to 75 Days 90 to 75 Days 75 to 60 Days
-0.0087 0.0140 -0.0033
Intercept
(-0.15) (1.74) (-0.48)
-0.0078*** -0.0019 0.0046***
Accel
(-2.71) (-0.62) (3.41)
0.0017 0.0042 0.0100***
ΔAccruals
(0.34) (0.73) (3.51)
0.0036 -0.0102 -0.0026
ΔAuditFees
(0.75) (-1.39) (-0.43)
-0.0065 -0.0138 -0.0042
ΔLnAssets
(-0.91) (-1.50) (-0.43)
-0.0022 -0.0002 0.0006
ΔSpecItems
(-0.37) (-0.04) (0.15)
0.0105** -0.0085 -0.0018
ΔROA
(1.99) (-1.22) (-0.30)
-0.0083 -0.0037 0.0054
ΔSales
(-1.48) (-1.00) (1.55)
0.0002 -0.0032 0.0019
Δ#Words
(0.04) (-0.91) (0.53)
0.0002 -0.0002 -0.0012*
Δ#Analysts
(0.19) (-0.55) (-1.80)
0.0262 0.0480* 0.0212
ΔEAInfo
(1.16) (1.73) (0.75)
-0.0001 -0.0002 -0.0061*
ΔEADays
(-0.69) (-0.98) (-1.76)
0.0072
ΔMatWeak - -
(1.30)
Adj. R2 1.17% 1.29% 3.36%
Sample Size 648 524 402

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a two-tailed t-test. Reported t-stats are based on clustered standard
errors. Small accelerated filers are those firms with MktCap > $75M and MktCap < $700M in the year of
acceleration. Large accelerated filers are those firms with MktCap > $700M in the year of acceleration. The
accelerated filers filed their 10-Ks 10 to 17 days sooner than the prior year. For all change (Δ) variables, except for
MatWeak, we take the absolute value of each variable in each year and then compute the difference. MatWeak is an
indicator variable equal to 1 if the firm reported a material weakness in the current year and zero otherwise, from
Audit Analytics. The change in MatWeak is the change in the indicator variable, ranging from -1 to +1. See
Appendix for all other variable definitions.

41
 Table 4
Multivariate Analysis of Changes in Market Reactions to 10-K Filings
for Small Versus Large Accelerated Filers
Δ MktReactiont = γ0 + γ1Large + γ2Accel + γ3Large*Accel + γ4ΔAccruals + γ5ΔAuditFees + γ6ΔLnAssets
+ γ7ΔSpecItems + γ8ΔROA + γ9ΔSales + γ10Δ#Words + γ11Δ#Analysts + γ12ΔEAInfo + γ13ΔEADays
+ γ14ΔMatWeak + εt

90 to 75 Days 75 to 60 Days
Variables Prediction
(t-stat ) (t-stat)
0.0067 -0.0050
Intercept
(1.18) (-1.55)
-0.0083*** 0.0100***
Accel
(-2.97) (2.44)
0.0071** -0.0012
Large*Accel + (1.96) (-1.52)
-0.0016 0.0006
Large
(-0.53) (0.81)
0.0028 0.0098
ΔAccruals
(0.78) (0.49)
0.0004 0.0366
ΔAuditFees
(0.08) (0.67)
-0.0103 0.0033
ΔLnAssets
(-1.51) (0.10)
-0.0008 0.0303
ΔSpecItems
(-0.17) (1.05)
0.0035 -0.0279
ΔROA
(0.76) (-1.04)
-0.0075* 0.0058
ΔSales
(-1.85) (1.06)
-0.0013 0.0028
Δ#Words
(-0.36) (0.74)
-0.0001 -0.0011
ΔAnalysts
(-0.21) (-1.59)
0.0347* 0.0244
ΔEAInfo
(1.95) (0.86)
-0.0057 -0.0001
ΔEADays
(-1.60) (-0.58)
0.0063
ΔMatWeak -
(1.05)
Adj. R2 1.14% 2.60%
Sample Size 1,172 402

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a two-tailed t-test. Reported t-stats are based on clustered standard
errors. In column 1, Large is an indicator variable equal to one if Mktcap > $700M and zero otherwise. In column 2,
Large is the quintile ranking of Mktcap. For all change (Δ) variables, we take the absolute value of each variable in
each year and then compute the difference. MatWeak is an indicator variable equal to 1 if the firm reported a
material weakness in the current year and zero otherwise. See Appendix for all other variable definitions.

42
 Table 5
Analysis of Changes in Restatements

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Pre-Acceleration Acceleration Within-Firm Difference
Restatement % Restatement % (t-stat)
Accelerated Filers 3.40%**
3.08% 6.48%
(N = 324) (2.13)
0.62%
Matched Sample 2.78% 3.40%
(0.45)
Test of Difference in 2.78%*
Differences (1.53)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm Difference
Restatement % Restatement % (t-stat)
Accelerated Filers 8.01%***
1.15% 9.16%
(N = 262) (4.77)
4.97%***
Matched Sample 0.76% 5.73%
(3.21)
Test of Difference in 3.04%***
Differences (2.81)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Pre-Acceleration Acceleration Within-Firm Difference
Restatement % Restatement % (t-stat)
Accelerated Filers -1.49%
3.48% 1.99%
(N = 201) (-1.00)
0.50%
Matched Sample 0.50% 1.00%
(0.58)
Test of Difference in -1.99%***
Differences (-4.10)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test (using clustered standard errors) of mean
difference. Using the restatement file from Audit Analytics, we classify a firm as a restatement firm if the firm
restated its financial statements within 18 months of the original 10-K filing date.

43
 Table 6
Analysis of Changes in Accrual Quality

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Pre-Acceleration Acceleration Within-Firm Difference
DDResidual DDResidual (t-stat)
Accelerated Filers 0.004
0.040 0.044
(N = 261) (0.90)
-0.007**
Matched Sample 0.044 0.037
(-2.29)
Test of Difference in 0.011**
Differences (2.25)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm Difference
DDResidual DDResidual (t-stat)
Accelerated Filers -0.003*
0.029 0.026
(N = 226) (-1.45)
-0.004
Matched Sample 0.028 0.024
(-1.89)**
Test of Difference in 0.0001
Differences (0.38)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Pre-Acceleration Acceleration Within-Firm Difference
DDResidual DDResidual (t-stat)
Accelerated Filers -0.008***
0.033 0.025
(N = 160) (-3.04)
-0.004**
Matched Sample 0.026 0.022
(-1.80)
Test of Difference in -0.004**
Differences (-1.69)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The non-accelerated matched samples are matched on MktCap,
filing year, and industry in the acceleration year. DDResidual is the residual from estimating a regression (by
industry and fiscal year) of working capital on prior-period operating cash flows (CFO), current-period CFO, next-
period CFO, year-end property plant and equipment, and change in sales. All variables are scaled by average total
assets.

44
 Table 7
Analysis of Changes in Discretionary Accruals

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Within-Firm
Pre-Acceleration Acceleration
Difference
DiscAccruals DiscAccruals
(t-stat)
Accelerated Filers 0.0009
0.0685 0.0694
(N = 321) (0.15)
-0.0049*
Matched Sample 0.0648 0.0597
(-1.36)
Test of Difference in 0.0058*
Differences (1.60)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Within-Firm
Pre-Acceleration Acceleration
Difference
DiscAccruals DiscAccruals
(t-stat)
Accelerated Filers -0.0038
0.0637 0.0599
(N = 258) (-0.98)
-0.0103***
Matched Sample 0.0588 0.0485
(-2.64)
Test of Difference in 0.0065**
Differences (2.15)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Within-Firm
Pre-Acceleration Acceleration
Difference
DiscAccruals DiscAccruals
(t-stat)
Accelerated Filers -0.0040
0.0541 0.0501
(N = 198) (-0.99)
0.0035
Matched Sample 0.0488 0.0523
(0.74)
Test of Difference in -0.0075***
Differences (-3.16)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The non-accelerated matched samples are matched on MktCap,
filing year, and industry in the acceleration year. DiscAccruals is the residual from estimating the regression (by
industry and fiscal year) of total accruals (net income – operating cash flows) on change in sales, property plant and
equipment, and ROA. All variables are scaled by beginning total assets.

45
 Table 8
Analysis of Changes in Total Information Content between the 15-day Period in the
Pre-Acceleration Period and the Same 15-day Period in the Acceleration Period

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Pre-Acceleration Acceleration Within-Firm Difference
TIC TIC (t-stat)
Accelerated Filers -0.073***
0.232 0.159
(N = 324) (-9.45)
-0.036***
Matched Sample 0.194 0.158
(-4.77)
Test of Difference in -0.037***
Differences (-3.41)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm Difference
TIC TIC (t-stat)
Accelerated Filers -0.063***
0.175 0.112
(N = 226) (-13.58)
-0.028***
Matched Sample 0.131 0.103
(-7.81)
Test of Difference in -0.035***
Differences (-6.03)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Pre-Acceleration Acceleration Within-Firm Difference
TIC TIC (t-stat)
Accelerated Filers -0.020***
0.116 0.096
(N = 160) (-5.01)
-0.003
Matched Sample 0.095 0.092
(-0.54)
Test of Difference in -0.017***
Differences (-2.76)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The non-accelerated matched samples are matched on MktCap,
filing year, and industry in the acceleration year. TIC is the sum of the absolute value of daily size-adjusted returns,
measured as the difference between a firm’s raw return and the return for the same period on the market-
capitalization based portfolio decile to which the firm is assigned at the beginning of the year. Absolute returns are
summed over the same 15 calendar days in both the pre acceleration period and the post acceleration period.

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 Table 9
Analysis of Scaled Relative Filing Order of 10-K Filings
by Industry and Fiscal Year End

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Within-Firm
Pre-Acceleration Acceleration
Difference
FilingOrder FilingOrder
(t-stat)
Accelerated Filers 0.240***
0.375 0.615
(N = 308) (21.9)

-0.097***
Matched Sample 0.755 0.658
(-10.01)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Within-Firm
Pre-Acceleration Acceleration
Difference
FilingOrder FilingOrder
(t-stat)
Accelerated Filers 0.162***
0.478 0.640
(N = 258) (13.61)

-0.074***
Matched Sample 0.837 0.761
(-9.10)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Within-Firm
Pre-Acceleration Acceleration
Difference
FilingOrder FilingOrder
(t-stat)
Accelerated Filers 0.239***
0.585 0.824
(N = 198) (22.10)

-0.044***
Matched Sample 0.839 0.795
(-5.35)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The non-accelerated matched samples are matched on MktCap,
filing year, and industry in the acceleration year. FilingOrder is the scaled relative rank order (from 1 to 0) that a
firm files its current fiscal year 10-K. Firms are grouped by industry (two-digit SIC) and fiscal year end. The first
firm to file a 10-K is assigned a rank of 1. Ranks are then scaled by the number of firms that filed a 10-K for the
same fiscal year end and industry with firms that file their 10-K first assigned a FilingOrder of 1, and firms that file
their 10-K last assigned a FilingOrder of zero.

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 Table 10
Analysis of Changes in 10-K Filing Intensity

Panel A: Small Accelerated Filers ($75M > Mktcap < $700M)

Pre-Acceleration Acceleration Within-Firm Difference
Intensity Intensity (t-stat)
Accelerated Filers 150***
267 417
(N = 324) (13.43)

71***
Matched Sample 201 272
(4.52)

Panel B: Large Accelerated Filers (Mktcap > $700M) from 90 days to 75 days
Pre-Acceleration Acceleration Within-Firm Difference
Intensity Intensity (t-stat)
Accelerated Filers 156***
306 462
(N = 262) (11.55)

163***
Matched Sample 62 225
(10.44)

Panel C: Large Accelerated Filers (Mktcap > $700M) from 75 days to 60 days
Pre-Acceleration Acceleration Within-Firm Difference
Intensity Intensity (t-stat)
Accelerated Filers 1
268 269
(N = 201) (0.06)

116***
Matched Sample 84 200
(11.19)

* / ** / *** Significant at 0.10 / 0.05 / 0.01 for a one-tailed t-test of means. Reported t-stats are based on clustered
standard errors, based on clustered filing dates. The non-accelerated matched samples are matched on MktCap,
filing year, and industry in the acceleration year. Intensity is measured as the number of firms that filed a 10-K on
the same date as firm i.

48