The Monitoring Effect of More Frequent Disclosure

• 成果类型: Article
• 署名作者: Downar, Benedikt; Ernstberger, Juergen; Link, Benedikt
• 署名单位: Technical University of Munich
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12386
• 发表日期: 2018
• 页码: 2058-2081
• 关键词: CORPORATE GOVERNANCE; AGENCY COSTS; Cash holdings; economic consequences; firm; earnings

摘要

This paper examines the monitoring effect of disclosure frequency from a shareholder perspective. For our analyses, we use a setting in the European Union in which reporting frequency requirements differed across and within countries before being harmonized by a directive requiring the implementation of quarterly disclosure. We investigate how both cross-sectional differences in reporting frequency and their harmonization affect shareholders' ability to monitor managers. To gauge monitoring effects, we use shareholders' valuation of cash assets. We find that semi-annual reporters exhibit lower cash valuation than quarterly reporters. Using a difference-in-differences approach, we show that these differences recede after semi-annual reporters implement a higher reporting frequency. Our results are consistent with the notion that more frequent disclosure reduces expected agency costs by providing shareholders with the opportunity for timelier monitoring to constrain managers from expropriating corporate resources. In additional analyses, we find that this monitoring effect is robust to using alternative measures of the change in cash and agency costs as well as alternative benchmark groups. Further, we find stronger effects when corporate governance or earnings quality is low.