The Fall of the 10-K Report: Measuring the Impact of Accounting Ratios on Financial Performance

• Main Author: Daruty, Matthew
• Format: Others
• Published: Scholarship @ Claremont 2019
• Subjects: Finance; Accounting; Accounting Ratios; Banks; Market Efficiency; Economics
• Online Access: https://scholarship.claremont.edu/cmc_theses/2225; https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=3219&context=cmc_theses

The annual 10-K report has historically been the most important aspect in assessing the position of a publicly held company. However, as the flow of information has increased with the dawn of new technologies, less and less attention has been paid to these audited financial statements. In order to assess if investors are still reacting to the information contained in the annual report, this paper examines the relationship between accounting ratios and stock price in banks traded on United States stock exchanges. By examining accounting ratios instead of simply looking at Earnings Per Share, new information was revealed regarding what aspects of the annual report investors react to. Ratios that incorporate information that is difficult to predict, such as leverage or allowance accounts were more likely to affect a stock’s performance, while those that contained information that is more readily available from other sources had less of an effect.