Asymmetric Timeliness and the Resolution of Investor Disagreement and Uncertainty at Earnings Announcements
61 Pages Posted: 28 Jul 2014 Last revised: 2 Apr 2019
Date Written: March 26, 2019
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: Suggested Citation