Opportunity Knocks But Once: Delayed Disclosure of Financial Items in Earnings Announcements and Neglect of Earnings News

Review of Accounting Studies, Forthcoming

57 Pages Posted: 3 Jul 2016 Last revised: 7 Oct 2019

See all articles by Yifan Li

Yifan Li

San Francisco State University

Alexander Nekrasov

University of Illinois Chicago

Siew Hong Teoh

UCLA Anderson School of Management

Date Written: September 25, 2019

Abstract

We define a delayed disclosure ratio (DD) as the fraction of 10-Q financial statement items that are withheld at the earlier quarterly earnings announcement. We find that higher DD firms have a greater delay in investor and analyst response to earnings surprises: (i) the fraction of total market reaction to quarterly earnings news realized around the earnings announcement (after the 10-Q filing) is smaller (greater), and (ii) analysts are more likely to defer issuing forecasts from immediately after the earnings announcement to after the 10-Q filing. Consistent with our limited attention model predictions, the response catch-up associated with DD is incomplete even after the delayed items are fully disclosed at the 10-Q filing date, and persists until the next earnings announcement date. The return reaction to earnings news over the entire quarter does not vary with DD, so differences in earnings informativeness do not explain the DD effect. Our findings suggest that, for limited attention effects to be mitigated, the timing of disclosures must be coincident with the focal periods—at earnings announcement dates—when investors and analysts are paying the most attention.

Keywords: Delayed disclosure, Analyst and investor underreaction, Earnings response coefficient, Post-earnings announcement drift, Limited attention, Market efficiency

JEL Classification: G14, G18, G28, G29, G38, M41, M45

Suggested Citation

Li, Yifan and Nekrasov, Alexander and Teoh, Siew Hong, Opportunity Knocks But Once: Delayed Disclosure of Financial Items in Earnings Announcements and Neglect of Earnings News (September 25, 2019). Review of Accounting Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2802937 or http://dx.doi.org/10.2139/ssrn.2802937

Yifan Li

San Francisco State University

United States

Alexander Nekrasov (Contact Author)

University of Illinois Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

HOME PAGE: http://business.uic.edu/profiles/alexander-nekrasov/

Siew Hong Teoh

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty-and-research/accounting/faculty/teoh

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