The Ever-Expanding 10-K: Why Are 10-Ks Getting So Much Longer (and Does It Matter)?
We document striking increases in length, complexity, and redundancy in 10-K disclosure over the period 1996-2013. Results are consistent after controlling for sample composition, economic determinants, litigation risk, SEC oversight, and other potential factors. All of the major sections of the 10-K have increased in length, suggesting that the increase is not the result of economic factors. Using Latent Dirichlet Allocation (LDA), we examine specific topics that firms discuss and find that the bulk of the increase in length is due to new compliance requirements from the FASB and SEC, and that 3 of the 150 topics we identify account for virtually all of the increase in disclosure length. These topics relate to fair value, internal controls, and risk factor disclosures, all of which were subject to mandatory changes during our period. We document that increases in these three disclosures also play a major role in explaining upward trends in Fog and redundancy. However, only risk factor disclosures appear to be useful to investors. Our results are relevant to concerns from regulators about increasingly onerous accounting disclosures and suggest that the increases in length, complexity, and redundancy are driven by regulation itself.