Saturday, May 28, 2016

Roseanne’s Lessons for Corporate Managers

Public companies are required to report certain material events within 4 business days on Form 8-K.  These events include such matters  as the departure of directors or officers, the disposition of assets, or material impairment of assets. 

In their paper Strategic Disclosure Misclassification, Andrew Bird, Stephen A. Karolyi, and Paul Ma find that in their 8-K filings, corporate managers seem to be taking a leaf from Roseanne’s bill paying system:


Specifically, Bird et al. find that companies frequently “misfile” their 8-Ks, categorizing them as miscellaneous “other” rather than properly identifying them in the appropriate category.  “Misfiling” is particularly likely to occur for negative events, and during periods when investor attention is high - suggesting that misfilings are part of a strategic effort to deflect investor attention.  Happily for corporate managers, the strategy is an effective one: misfiled 8-Ks not only receive less traffic, but they also have less stock price impact.

Roseanne would be so proud.

Ann Lipton | Permalink


It would be interesting, Ann, to do a qualitative study on this filing failure to determine why it is occurring. I say this because I have anecdotally noted over the years the tendency of issuers to mis-categorize miscellaneous contract exhibit filings, putting all sorts of random contracts in that category that do not belong there under the instructions in Item 601 of Regulation S-K. I always have assumed that the people making the filings just weren't paying attention to the rules. But maybe there's a more nefarious method to their madness . . . .

Posted by: joanheminway | May 30, 2016 6:54:55 AM

After reading this paper, I rather suspect it's a combination of both - but yeah, I agree it would be interesting to see how this plays out beyond 8-K.

Posted by: Ann Lipton | May 30, 2016 7:47:00 AM

Post a comment