Anand Jha wins 2018 MFA behavioral finance award
Associate Professor of Finance Anand Jha received the Behavioral Finance Award given by the Midwest Finance Association for his paper entitled, "Strategic Alliances and the Readability of 10-Ks."
The paper is co-authored with Muffaddal Baxamusa (St. Thomas University) and Abu Jalal (Suffolk University).
Jha's research and teaching interests include corporate finance and financial institutions. His work has been published in the Journal of Banking & Finance, Journal of Financial Research, and the Accounting Review.
Abstract
We investigate how the readability of a partner’s 10-K report affects investors’ reaction to the announcement of a strategic alliance. We find that the increase in the cumulative abnormal return (CAR) around the announcement of an alliance is relatively lower when a partner has a less readable 10-K report. This result is robust when using different measures of readability and CAR, and alternative techniques to examine this association such as propensity score matching and instrumental variable analysis. Additional tests show that the adverse impact of readability is worse when investors suspect insufficient due diligence before alliance formation, when the partner is from a different industry, and when the alliance occurs before the Sarbanes-Oxley Act. We also find that an announced alliance is unlikely to come to fruition if the partner’s 10-K report is less readable at the time of announcement. Our results are based on examining 1,870 strategic alliances that occurred between 1995 and 2012 in the United States. Overall, our results are consistent with the psychology and behavioral economics literature.
