Voluntary Disclosure and Earnings Asymmetric Timeliness

47 Pages Posted: 18 Jul 2016 Last revised: 15 Jan 2019

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Bryce Schonberger

University of Rochester - Simon Business School

Charles E. Wasley

Simon School, University of Rochester

Date Written: January 14, 2019

Abstract

Managers’ voluntary disclosure of forward-looking earnings information results in stock prices reflecting that information prior to the fiscal period when the corresponding earnings are announced. We predict that forward-looking management earnings forecasts (MFs) will lead to a weaker relation between contemporaneous returns and earnings, resulting in a predictable attenuation in earnings asymmetric timeliness measured using the Basu (1997) model (and related models). The intuition is that forward-looking disclosures such as MFs decouple the period in which prices reflect the earnings news from the future period in which the actual earnings related to the forecast will be recognized and announced. We find that earnings’ asymmetric timeliness is insignificant for firms issuing MFs of future-year earnings. Additional analysis rules out the alternative explanation that these findings are due to differences in the pattern of earnings recognition or total information flow in periods with forward-looking disclosures. An implication of our findings is that, in the presence of forward-looking managerial disclosures such as MFs, research on conservatism should exercise caution when attributing variation in asymmetric timeliness exclusively to the hypothesized determinants of conservatism.

Keywords: asymmetric timeliness of earnings, voluntary disclosure, management earnings forecasts, conservatism

JEL Classification: M4

Suggested Citation

Dambra, Michael and Schonberger, Bryce and Wasley, Charles E., Voluntary Disclosure and Earnings Asymmetric Timeliness (January 14, 2019). Simon Business School Working Paper No. FR 16-04. Available at SSRN: https://ssrn.com/abstract=2811265 or http://dx.doi.org/10.2139/ssrn.2811265

Michael Dambra (Contact Author)

SUNY at Buffalo - School of Management ( email )

354 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

Bryce Schonberger

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Charles E. Wasley

Simon School, University of Rochester ( email )

Rochester, NY 14627
United States
585-275-3362 (Phone)
585-442-6323 (Fax)

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