Leader versus lagger: How the timing of financial reports affects audit quality and investment efficiency

• 成果类型: Article
• 署名作者: Liu, Nanqin; Zhang, Xiao-Jun
• 署名单位: University of Macau; University of California System; University of California Berkeley
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12967
• 发表日期: 2024
• 页码: 2163-2198
• 关键词: legal liability; STANDARDS; disclosure

摘要

This paper examines how relative timing affects the quality of financial reports in a staggered reporting system in which some firms report earlier than others. We show that the audit quality of the leading firm exceeds that of the lagger. Investment efficiency also differs systematically across firms, depending on the relative reporting timing as well as the audit market structure. Audit regulations mitigate the misalignment of interests between auditors and investors but limit the effect of information spillovers. We characterize the socially optimal auditing standards and show how and why imposing minimum audit quality requirements complements and/or substitutes for adjusting auditors' legal liability. Overall, we show that a staggered reporting system dominates a simultaneous reporting system in enhancing audit quality and investment efficiency through regulation.