10-K filing content and SEO flotation costs

This study examines whether firms’ 10-K disclosures, especially filing size and sentiment, affect the flotation costs of seasoned equity offerings. We find the flotation costs are higher when there are less information and more negative sentiment in 10-K filings. Using a cross-sectional approach, this study suggests that among a subsample of largest firms and/or proceeds, underwriters receive higher compensation through a wider gross spread where there is a lower volume of information in their 10-K filing. Addressing the multicollinearity issue between firm size, offer size and gross spread, these results are robust given joint consideration of offer size and major information asymmetry components. We also show that a negative tone of 10-K filing increases the probability of an offer withdrawal by underwriters. Overall, this study suggests that the size and sentiment of 10-K filings are important determinants of uncertainty for underwriters in the event of a seasoned equity offering.