The Dark Side of Low Financial Reporting Frequency: Investors' Reliance on Alternative Sources of Earnings News and Excessive Information Spillovers

• 成果类型: Article
• 署名作者: Arif, Salman; De George, Emmanuel T.
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; University of Miami
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/tar-2017-0018
• 发表日期: 2020
• 页码: 23-49
• 关键词: capital-markets; disclosure; environment; security; return; equilibrium; PSYCHOLOGY; voluntary; transfers; analysts

摘要

This paper examines how low financial reporting frequency affects investors' reliance on alternative sources of earnings information. We find that the returns of semi-annual earnings announcers (i.e., low reporting frequency stocks [LRF]) are almost twice as sensitive to the earnings announcement returns of U.S. industry bellwether peers for non-reporting periods compared to reporting periods. Strikingly, these heightened spillovers are followed by return reversals when investors finally observe own-firm earnings at the subsequent semi-annual earnings announcement. This indicates that investors periodically overreact to peer-firm earnings news in the absence of own-firm earnings disclosures in interim periods. We also find elevated price volatility and trading volume around earnings announcements for non-reporting periods, consistent with theories of investor overconfidence. Collectively, our results suggest that investors are unable to successfully offset the information loss arising from low reporting frequency, thus impairing their ability to value firms and adversely affecting the quality of financial markets.