Reporting frequency, information precision and private information acquisition

R.J.R. Cuijpers, E. Peek

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)

Abstract

This study examines whether the choice between quarterly and semiannual reporting affects the precision of investors' information and their private information acquisition activities. In the first part of this study, we show that a firm's reporting frequency has no effect on the average precision of investors' information. However, our analysis of announcement-period price variance and share turnover shows that an increase in reporting frequency does make interim and annual financial reports a more important component of investors' information set, relative to other sources of information. In particular, the results of this analysis suggest that investors of semiannual reporters hold more precise pre-announcement information than investors of quarterly reporters. In the second part of our study, we test one explanation for this finding. We argue that an increase in a firm's reporting frequency reduces investors' incentives to acquire private information between consecutive announcement dates and, consequently, should reduce information asymmetry among investors, increase share liquidity, and stimulate trading. Consistent with this reasoning, we find that quarterly reporters have lower average bid-ask spreads and higher abnormal share turnover than semiannual reporters.

Original languageEnglish
Pages (from-to)27-59
Number of pages33
JournalJournal of Business Finance & Accounting
Volume37
Issue number1-2
DOIs
Publication statusPublished - 1 Jan 2010

Keywords

  • reporting frequency
  • information precision
  • private information acquisition
  • liquidity
  • trading
  • ACCOUNTING EARNINGS ANNOUNCEMENTS
  • TRADING VOLUME
  • QUARTERLY EARNINGS
  • ECONOMIC CONSEQUENCES
  • CORPORATE GOVERNANCE
  • INVESTOR PROTECTION
  • MARKET LIQUIDITY
  • INTERIM REPORTS
  • DISCLOSURES
  • PRICE

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