The Filing of Amendments and Investors' Behavior

Authors: Timo Schäfer (Goethe University), Alexander Hillert (Goethe University)

Title: The Filing of Amendments and Investors' Behavior

Abstract: In this paper, we analyze the determinants and investors' reactions to amendments to firms' form 10-K and 10-Q filings in the U.S. We find that companies with low profitability, high idiosyncratic risk, and little outside monitoring (low analyst coverage, low institutional ownership, no Big Four auditor) are more likely to amend their filings. Increases in EDGAR traffic and high abnormal trading volume around the filing date of amendments indicate that investors react strongly to the filing of amendments. The average amendment results in a negative and significant return reaction. Using a topic modelling approach, we show that this negative investor reaction is primarily driven by material financing-related amendments, while mundane and technical amendments do not result in significant abnormal filing returns. Besides, the magnitude of abnormal filing returns depends on the filing type, filing delay of the amendment, and the presentation format of the new information in the amendment.