Asymmetric Timeliness and the Resolution of Investor Disagreement and Uncertainty at Earnings Announcements

61 Pages Posted: 28 Jul 2014 Last revised: 2 Apr 2019

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Vivek Raval

University of Illinois at Chicago - Department of Accounting

Sean Wang

Southern Methodist University

Date Written: March 26, 2019

Abstract

This study finds that greater asymmetric timeliness of earnings in reflecting good and bad news is associated with slower resolution of investor disagreement and uncertainty at earnings announcements. These findings indicate that a potential cost of asymmetric timeliness is added complexity from requiring investors to disaggregate earnings into good and bad news components to assess the implications of the earnings announcement for their investment decisions. Such a disaggregation impedes the speed with which investor disagreement and uncertainty resolve. The findings indicate asymmetric timeliness also delays price discovery at earnings announcements. We also find a positive relation between asymmetric timeliness and stock returns during the earnings announcement period after the initial price reaction to the announcement, which is consistent with resolution of valuation uncertainty. However, we do not find clear evidence of more net stock purchases during this period by insiders of firms with greater asymmetric timeliness.

Keywords: conditional conservatism, earnings announcements, information content

JEL Classification: M41, G14

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Raval, Vivek and Wang, Sean, Asymmetric Timeliness and the Resolution of Investor Disagreement and Uncertainty at Earnings Announcements (March 26, 2019). Rock Center for Corporate Governance at Stanford University Working Paper No. 162; UNC Kenan-Flagler Research Paper. Available at SSRN: https://ssrn.com/abstract=2348905 or http://dx.doi.org/10.2139/ssrn.2348905

Mary E. Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Vivek Raval

University of Illinois at Chicago - Department of Accounting ( email )

601 South Morgan Street
University Hall, Room 2303
Chicago, IL 60607
United States

Sean Wang

Southern Methodist University ( email )

P.O. Box 750333
Dallas, TX 75275-0333
United States
2147682858 (Phone)

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