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Form 10-K – Definition

Form 10-K Definition

A Form 10-K summarizes in detail the company’s performance in a report for a five-year period. For public companies (or reporting companies), the report is sent to Securities and Exchange Commission (SEC) as part of the company’s on-gong reporting and disclosure requirements. It is more comprehensive than annual report, and bears important information for the new investors of the company.

A Little More on What is the 10-K Report

A 10-K report has been imposed as mandatory requirement for the companies by the Federal Government to help investors make informed decisions about their investments in the company.

The 10-K includes five sections:

  • Overview of company
  • Risk factors, present and future
  • Last five years financial data including Management Discussion &Analysis
  • Supplementary data and audited financial statements
  • Signed letters of top tier management for data accuracy assurance

The 10-K report is pubic information available on various resources, including Investor Relations section of the company’s website.

References for the 10-K

Academic Research on Form 10-K

Extensions and violations of the statutory SEC Form 10filing requirements, Alford, A. W., Jones, J. J., & Zmijewski, M. E. (1994). Journal of Accounting and Economics17(1-2), 229-254. This paper provides an insight into firms that delay filing their 10-K. It explores the percent of firms that deliberately delay filing their 10-K and states the possible reasons for this development.

Got information? Investor response to Form 10and Form 10-Q EDGAR filings, Griffin, P. A. (2003). Review of Accounting Studies8(4), 433-460. This study examines the investor response to Form 10-K and 10-Q reports filed between 1996 and 2001. The samples comprise essentially the entire body of EDGAR filings, including the small business (SB) versions of each filing type. The study documents that the absolute value of excess return is reliably greater on the day of and on the one or two days immediately following the filing date.

An empirical examination of the form of the relationship between multinationality and performance, Gomes, L., & Ramaswamy, K. (1999). Journal of international business studies30(1), 173-187. This paper reports findings from a study that systematically evaluated the form of the relationship between multinationality and performance. In contrast to most of the prior conceptualizations that rely on linear, monotonic models of the linkage, this study examined a curvilinear model that addresses both the costs and benefits associated with multinationality. It used time-series techniques to capture both the static and dynamic components of the relationship.

Financial reporting complexity and investor underreaction to 10information, You, H., & Zhang, X. J. (2009). Review of Accounting studies14(4), 559-586. This paper studies the immediate and delayed market reaction to U.S. Securities and Exchange Commission (SEC) EDGAR 10-K filings. Unusual trading volumes and stock-price movements are documented during the days around the 10-K filing dates. It also examines investors reactions to 10-K information, and states the reasons, and factors that lead to these different reactions.

A measure of competition based on 10K filings, Li, F., Lundholm, R., & Minnis, M. (2013). Journal of Accounting Research51(2), 399-436. In this paper, the authors develop a measure of competition based on management’s disclosures in their 10‐K filing and find that firms’ rates of diminishing marginal returns on new and existing investment vary significantly with our measure. It shows that these firm‐level disclosures are related to existing industry‐level measures of disclosure, but capture something distinctly new. Lastly, the authors present a battery of specification tests designed to explore the boundaries of our measure and how it varies with the definition of industry and the presence of other measures of competition.

The market reaction to 10and 10-Q filings and to subsequent The Wall Street Journal earnings announcements, Stice, E. K. (1991). Accounting Review, 42-55.

Jeopardy, non-public information, and insider trading around SEC 10and 10-Q filings, Huddart, S., Ke, B., & Shi, C. (2007). Journal of Accounting and Economics43(1), 3-36. This paper analyses U.S insiders behaviour to trade conditioning in the presence and absence of jeopardy. Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated with such trades is high, such as immediately before earnings announcements.

Accounting adjustments and the valuation of financial statement note information in 10K filings, De Franco, G., Wong, M. F., & Zhou, Y. (2011). The Accounting Review86(5), 1577-1604. This paper examines the valuation of financial statement note information at the time of 10-K filings. Findings show that stock returns around 10-K filings are positively related to accounting adjustments calculated from financial statement note information. Further documented in the text is the likelihood of equity analysts issuing a report and updating their target price estimates at the 10-K dates is increasing in the magnitude of the adjustments.

Did accelerated filing requirements and SOX Section 404 affect the timeliness of 10K filings?, Impink, J., Lubberink, M., van Praag, B., & Veenman, D. (2012). Review of Accounting Studies17(2), 227-253. This paper examines the effect of Sarbanes-Oxley provisions on 10-K filing delays. The authors find that tightened filing deadlines for accelerated and large accelerated filers are not associated with changes in the incidence of late filing. Lastly, findings show that market reactions to late filing notifications are more negative when management provides no meaningful explanation for the delay, consistent with managers’ incentives to withhold bad news.

Non-timely 10K filings and audit fees, Wang, C., Raghunandan, K., & McEwen, R. A. (2013). Accounting Horizons27(4), 737-755. The SEC requires that firms failing to file their annual reports within the specified deadlines file a Form NT 10-K with the Commission. This paper examines the impact of non-timely filings on audit fees.

When is a liability not a liability? Textual analysis, dictionaries, and 10Ks, Loughran, T., & McDonald, B. (2011). The Journal of Finance66(1), 35-65.Previous research uses negative word counts to measure the tone of a text. The authors show that word lists developed for other disciplines misclassify common words in financial text. In a large sample of 10‐Ks during 1994 to 2008, almost three‐fourths of the words identified as negative by the widely used Harvard Dictionary are words typically not considered negative in financial contexts. They further develop an alternative negative word list, along with five other word lists, that better reflect tone in financial text.

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