The Information Content of Timely Sales Disclosures: Evidence from the Retail Industry
48 Pages Posted: 23 Nov 2014
Date Written: October 3, 2014
This paper examines the information content of voluntary monthly sales disclosures by retailers. Prior research suggests that quarterly earnings announcements explain only a small portion of the variation in annual or quarterly buy-and-hold abnormal returns, but likely play an important role in lending credibility to more timely management disclosures. Consistent with this notion, we find that earnings announcements only explain about 8% of the variation in total quarterly buy-and-hold abnormal returns, while reported monthly sales explain an additional 29%. To our knowledge no other single type of routine disclosure explains more. Monthly sales disclosures also provide a clean setting to isolate the information content of sales from earnings, which enables us to demonstrate that sales information is much more informative to the stock market than documented in prior studies. Furthermore, consistent with forecasting models of earnings and cash flows, we document that the market reaction to monthly sales disclosures stems primarily from growth in same store sales (the persistent portion of total revenue) rather than sales changes from store openings and closings (the transitory portion of total revenue).
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