The Effect Of Interim Reporting Frequency On The Timeliness Of Earnings

Interim reports shorten disclosure period and transfer earnings information to the market in good time and thus accelerate the speed with which accounting information is impounded into price. But more accounting estimates and subjective judgement are simultaneously involved as disclosure interval is shortened. Together with the effects of seasonal factors etc., the investment decision-making serviceability of interim reports is becoming unclear.In order to examine the efficiency of interim reports, this dissertation study how the frequency of interim reporting affects earnings timeliness. We characterize timeliness in two distinct ways, intraperiod and long-horizon timeliness. The first concept of timeliness captures the speed with which earnings information is impounded into price over a given period(e.g., a year). The second concept of timeliness captures the extent to which current earnings contain current economic income or all value-relevant information and it can be viewed as measuring how much of the period's earnings information is associated with contemporaneous returns. In this dissertation, we first examine the difference of timeliness between different interim reporting frequency (namely, quarterly and semiannual). And the evidence suggests that firms experienced changeless intraperiod timeliness and increased long-horizon timeliness when firms increased reporting frequency from semiannual to quarterly. Considering that a mandated increase in interim reporting frequency is likely to affect firms' voluntary disclosures policy and such voluntary disclosures are arguably more precise indicators of firm value, we continue examine how different natures of interim reporting frequency increase affect earnings timeliness. We find evidence that both intraperiod timeliness and long-horizon timeliness increased after the increase of interim reporting frequency was mandated by regulation institution. However, firms that voluntarily increased reporting frequency from semiannual to quarterly experieced decreased timeliness and this is related to the specific environment of stock market in China around the voluntary increase of interim reporting frequency. In addition, this dissertation controls for the fact that firms self-select reporting frequency using Heckman's (1979) procedure.This dissertation can help us to improve our understanding of the capital-market effects of increased disclosure. And it also can support regulation institution to decide relevant information disclosure policy. Unlike previous domestic research on interim reports, this dissertation directly tests the effect of disclosure frequency on timeliness and also controls for self-selection of reporting frequency using Heckman two-stage procedure.