Investors Perception of Mandatory Quarterly Reporting: Evidence from UK Interim Management Statements

• In Event: 8.01. Timeliness of Earnings

Abstract

This paper investigates whether mandatory quarterly reporting is, overall, beneficial or costly to shareholders. We use the UK setting where quarterly Interim Management Statements (IMS) were mandated in 2004 but were subsequently reverted back to voluntary in 2014. We find that UK investors react negatively (positively) to events increasing (decreasing) the likelihood of the 2004 mandate. Moreover, investors of firms in high litigation risk industries and investors of firms with complex business react more negatively to the 2004 mandate. We also find UK investors react positively to the first event leading to reverting quarterly IMS back to voluntary. These results are consistent with the premise that mandatory quarterly IMS are net costly for shareholders of listed firms. Overall, our findings support the regulators’ decision to make quarterly IMS voluntary.

Authors

• Helen Kang, UNSW Sydney

• Kevin Chao Li, UNSW Sydney

• Yuchen Zhang, UNSW Sydney