A Growing Disparity in Earnings Disclosure Mechanisms: The Rise of Concurrent Earnings Announcements

• In Event: Effects of Mandatory Disclosure

Abstract

We show that the conventional disclosure practice of ‘stand-alone’ earnings announcements which pre-empt 10-K filings is steadily disappearing over time. Instead, firms are increasingly holding ‘concurrent’ earnings announcements under which the earnings announcement and the filing of the 10-K occurs on the same day. We contend that regulatory changes in the early 2000s changed the cost-benefit tradeoff of releasing stand-alone earnings announcements and find that firms with lower investor demand for, and greater impediments to producing timely earnings information are more likely to have switched from stand-alone to concurrent earnings announcements during the regulatory changes. Further, we find that firms switch to a concurrent earnings announcement strategy more quickly when they incur recent announcements about accounting system weaknesses and when a large number of peer firms release concurrent earnings announcements. Importantly for investors, we find that concurrent earnings announcements are less timely and less decision useful than stand-alone earnings announcements. Specifically, we document that, relative to stand-alone announcements, concurrent announcements are associated with greater anticipation of earnings news by investors and an attenuated market reaction to the earnings announcement even after controlling for timeliness. Collectively, we document a distinct divide in the marketplace, with a growing number of firms switching to the less decision useful practice of concurrent earnings announcements.

Authors

• Salman Arif, Indiana University Bloomington

• Nathan Thomas Marshall, University of Colorado Boulder

• Joseph H Schroeder, Indiana University - Bloomington

• Teri Lombardi Yohn, Indiana University - Bloomington