Revealing Future Prospects Without Forecasts: The Case of Accelerating Material Contract Filings
Edward Xuejun Li
City University of New York (CUNY) - Stan Ross Department of Accountancy
October 19, 2012
Accounting Review, Vol. 88, No. 5, pp.. 1769-1804, November 2013
Extant research on voluntary disclosure about future prospects has focused on two forward-looking disclosure mechanisms: management forecasts and conference calls. This study examines the accelerated filing of material contracts as another type of future-related disclosure that involves no forecasting. I find that firms are more likely to accelerate material contract filings when forward-looking disclosures could lack credibility or arouse litigation concerns. However, for proprietary cost considerations, firms delay contract filings when facing high (low) product market competition from incumbents (potential entrants). I also find that accelerated contract filing is incrementally associated with lower information asymmetry. Overall, while presenting a cost-benefit trade-off that is distinctly different from forward-looking disclosures, accelerated contract filing has been an important alternative channel though which firms communicate future prospects to investors.
Number of Pages in PDF File: 66
Keywords: Material Contracts, Form 8-K, Management Forecasts, Disclosure Credibility, Proprietary costs
JEL Classification: G12, M41, G32, G38Accepted Paper Series
Date posted: January 25, 2008 ; Last revised: May 27, 2014
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