When it comes to annual reports, size matters.

That's the long and the short of it, according to a new report from Merrill Lynch, which compared the size of companies' 10K filings with their stock performances.

In general, the larger the document was, the worse the stock performed. A 10K provides investors--and the Securities and Exchange Commission--with a comprehensive overview of a company for a given fiscal year, with information about its organization, equity, holdings, earnings per share and other financial matters.

The theory is that longer 10Ks include more footnotes, generally to explain away complicated business issues such as write-offs.

"The longer the 10K, the more complex and often messed up the business," the research company said. "So unless there are special circumstances, watch out, since fewer than one of five companies with 10Ks greater than 500 KB outperformed the (Merrill Lynch index) over the 12-month period."

The brokerage compared 48 businesses in its Merrill Lynch 100 index, measuring their performance against the index as a whole over a year. Stocks with 10Ks taking up more than 500KB of memory were off an average of 77 percent over that year, compared to the index's 63 percent drop.

And the correlation works both ways; stocks of companies with 10Ks less than 300KB dropped only 52 percent.

The turning point appears to be at about 400KB, Merrill Lynch said. "Above that level, stock performance quickly deteriorates," said Merrill Lynch.

Of course, the research firm did have a very small sample size, and there were some statistical anomalies. AOL Time Warner (NYSE: AOL), for instance, had the largest 10K measured, at 1,861KB, because of the merger of America Online and Time Warner. But that company outperformed the index, seeing its stock rise 40 percent over the time measured.

And while Merrill Lynch cautions against expanding the data to other sectors, it does appear to hold up in certain cases.

Take a look at CMGI (Nasdaq: CMGI), for instance. That company filed a 1,939KB whopper of a 10K back in October, going over its various business, investments and acquisitions. Between March 31, 2000 and March 31, 2001, the period studied by Merrill Lynch, CMGI's stock fell 97.7 percent.

Or Priceline (Nasdaq: PCLN), which turned in a 636KB filing on March 30. It's stock was off 96.8 percent over that period.

And IBM (NYSE: IBM), which filed a trim 367KB 10K on March 13, saw its stock dip only 18.7 percent during that time period.