Frequent Financial Reporting and Managerial Myopia

Posted: 20 Jun 2014 Last revised: 5 May 2017

Arthur G. Kraft

City University London - Cass Business School

Rahul Vashishtha

Duke University

Mohan Venkatachalam

Duke University - Fuqua School of Business

Date Written: April 1, 2017

Abstract

Using the transition of US firms from annual reporting to semi-annual reporting and then to quarterly reporting over the period 1950-1970, we provide evidence on the effects of increased reporting frequency on firms’ investment decisions. Estimates from difference-in-differences specifications indicate that increased reporting frequency is associated with an economically large decline in investments. Additional analyses reveal that the decline in investments is most consistent with frequent financial reporting inducing myopic management behavior. Our evidence informs the recent controversial debate about eliminating quarterly reporting for US corporations.

Keywords: Financial reporting frequency, real effects, myopia, investment, short termism

JEL Classification: M41, M40, G31, G30

Suggested Citation

Kraft, Arthur G. and Vashishtha, Rahul and Venkatachalam, Mohan, Frequent Financial Reporting and Managerial Myopia (April 1, 2017). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2456765 or http://dx.doi.org/10.2139/ssrn.2456765

Arthur Gerald Kraft

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain

Rahul Vashishtha (Contact Author)

Duke University ( email )

Durham, NC 27708-0204
United States
919-660-7755 (Phone)
91-660-7971 (Fax)

Mohan Venkatachalam

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7859 (Phone)
919-660-7971 (Fax)

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