Revealing Future Prospects Without Forecasts: The Case of Accelerating Material Contract Filings

66 Pages Posted: 25 Jan 2008 Last revised: 27 May 2014

Edward Xuejun Li

City University of New York (CUNY) - Stan Ross Department of Accountancy

Date Written: October 19, 2012

Abstract

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.

Keywords: Material Contracts, Form 8-K, Management Forecasts, Disclosure Credibility, Proprietary costs

JEL Classification: G12, M41, G32, G38

Suggested Citation

Li, Edward Xuejun, Revealing Future Prospects Without Forecasts: The Case of Accelerating Material Contract Filings (October 19, 2012). Accounting Review, Vol. 88, No. 5, pp.. 1769-1804, November 2013 . Available at SSRN: https://ssrn.com/abstract=1086486 or http://dx.doi.org/10.2139/ssrn.1086486

Edward Xuejun Li (Contact Author)

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3235 (Phone)

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