Earnings Asymmetric Timeliness and Shareholder Distributions

Frankel, Richard M.; Sun, Yan; Wang, Rong

doi:10.2139/ssrn.1157547

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Earnings Asymmetric Timeliness and Shareholder Distributions

49 Pages Posted: 10 Jul 2008 Last revised: 14 Nov 2013

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Rong Wang

Singapore Management University; Singapore Management University - Lee Kong Chian School of Business

Date Written: July 2008

Abstract

We study whether more asymmetrically timely earnings constrain payouts to shareholders in the presence of bad news. Our goal is to provide evidence on the ex post contracting benefits of accounting conservatism. We distinguish between cash flow asymmetric timeliness and accrual asymmetric timeliness to examine how each relates to asymmetric sensitivity of shareholder payouts. We find that only the asymmetric timeliness of cash flows is significantly related to the asymmetric sensitivity of shareholder payouts. Other measures of conservatism (earnings skewness and accumulated nonoperating accruals) are also not significantly related to the sensitivity of shareholder payouts given bad news. These results suggest that accounting policies do not significantly constrain shareholder distributions conditional on news that does not affect cash flows.

Keywords: Asymmetric timeliness, shareholder distributions

JEL Classification: M41, M44, G32, G35

Suggested Citation: Suggested Citation

Frankel, Richard M. and Sun, Yan and Wang, Rong, Earnings Asymmetric Timeliness and Shareholder Distributions (July 2008). Available at SSRN: https://ssrn.com/abstract=1157547 or http://dx.doi.org/10.2139/ssrn.1157547