Opportunity Knocks But Once: Delayed Disclosure of Financial Items in Earnings Announcements and Neglect of Earnings News
56 Pages Posted: 3 Jul 2016 Last revised: 5 Sep 2018
Date Written: August 13, 2018
We define a delayed disclosure ratio (DD) as the fraction of 10-Q/K financial statement items that are withheld at the earlier 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 earnings news realized around the earnings announcement (after the 10-Q/K 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/K 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/K 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 the importance for the timing of disclosures to be coincident with the focal periods—at earnings announcement dates—when investors and analysts are paying the most attention to mitigate limited attention effects.
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: Suggested Citation