andExchangeCommission(SEC)rangeinsizefromlessthan
200 pages toin excess of 1,000 pages.In Table 16.1, we
summarizethelengthofthefilingsforthe 2004 financialyear
for 10 large market capitalization firms in the United States.
TABLE 16.1Market Reaction to Divestiture Announcements
Source:Linn and Rozeff (1984).
Motive Announced
Price AnnouncedYes No
Yes 3.92% 2.30%
No 0.70% 0.37%Using this measure, Citigroup and AIG have the most
complexfinancial statements,whereas Microsoft,Intel,and
Johnson&Johnsonhavetheleastcomplexstatementsofthe
10 firms listed. The reason it is a simplistic measure, of
course,isbecauseashort10-Kcanreflectasimplebusiness
and financial structure or just indicate an absence of
informationaboutthefirm’soperations.However,lookingat
differences across firms on the length of the 10-K does
providesome interestinginsightsintowhysomecompanies
become more complex (at least in terms of the 10-K length):
- Nonfinancial service firms with capital arms (GE
Capital,IBM)tendtohavelongerannualreportsand
financialstatementsthansimilarfirmswithoutthese
capital arms. As we noted earlier, these financial
subsidiariesresemblebanksmuchmorecloselythan
theydothefirmsthattheyareattachedto;GECapital
ismorecomparabletoalargefinancialservicefirm