Are Interim Management Statements Redundant?

Forthcoming in Accounting and Business Research in 2015, doi 10.1080/00014788.2014.1002444

Posted: 31 Dec 2014

See all articles by Thomas Schleicher

Thomas Schleicher

University of Manchester - Manchester Business School

Martin Walker

University of Manchester - Manchester Business School

Date Written: 2015

Abstract

In 2004 the Transparency Directive increased the annual reporting frequency by mandating the Interim Management Statement (IMS). However, only nine years later, the EU announced that it was making quarterly reporting voluntary again arguing that IMSs are redundant as they are unlikely to contain any additional information not already required by the Market Abuse Directive (MAD). The current paper tests this argument empirically. For that it collects data on trading statements from a post-MAD pre-IMS year and uses these statements to predict which IMSs are genuinely incremental firm announcements (‘incremental IMSs’) and not simply substitutes for otherwise disclosed trading statements (‘non-incremental IMSs’). It then calculates three-day abnormal return variability and abnormal trading volume associated with incremental and non-incremental IMSs and it makes three observations. First, the introduction of IMSs coincided with a substantial reduction in other trading statements consistent with a large substitution effect between IMSs and non-periodic trading statements. Second, incremental third-quarter IMSs, but not incremental first-quarter IMSs, exhibit significantly positive abnormal return variability and abnormal trading volume suggesting that the withdrawal of IMSs will involve the loss of some relevant information. Third, higher abnormal return variability and trading volume for non-incremental IMSs, relative to incremental IMSs, are consistent with the argument that a MAD-only regime will ensure the release of most relevant information.

Keywords: Abnormal Return Variability, Abnormal Trading Volume, Market Abuse Directive, Reporting Frequency, Transparency Directive

Suggested Citation

Schleicher, Thomas and Walker, Martin, Are Interim Management Statements Redundant? (2015). Forthcoming in Accounting and Business Research in 2015, doi 10.1080/00014788.2014.1002444, Available at SSRN: https://ssrn.com/abstract=2542068

Thomas Schleicher (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,149
PlumX Metrics