Consequences of Mandatory Quarterly Reporting: The U.K. Experience

52 Pages Posted: 30 Aug 2016 Last revised: 15 Mar 2017

See all articles by Suresh Nallareddy

Suresh Nallareddy

Duke University - Fuqua School of Business

Robert Pozen

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Shivaram Rajgopal

Columbia Business School

Date Written: March 1, 2017

Abstract

The Securities and Exchange Commission (SEC) is considering the pros and cons of moving to semi-annual reporting from quarterly reporting at least for certain segments of the market. However, documenting causal evidence on the consequences of mandatory quarterly reporting has been difficult, due to either the absence of a clear exogenous shock or older data. We exploit the start of mandatory quarterly reporting by the Financial Conduct Authority (FCA) in 2007 and the end of the requirement in 2014 in the United Kingdom to examine corporate and capital market behavior. After imposition of mandatory quarterly reporting in 2007, we find (i) a dramatic decline in the number of companies that issue reports with quantitative information (defined as including both sales and earnings numbers for the quarter); (ii) a substantial increase in companies announcing managerial guidance for the upcoming year's earnings or sales; and (iii) an increase in analyst following for all sample companies. However, using a difference-in-differences analysis, we find that the imposition of mandatory quarterly reporting has virtually no impact on firms’ investment decisions. Companies that voluntarily moved back from quarterly to semi-annual reporting after 2014 have experienced a reduction in analyst coverage, but no detectable increases in their levels of corporate investments.

Keywords: Quarterly reporting; Analyst following; Investments; Disclosure

JEL Classification: M41

Suggested Citation

Nallareddy, Suresh and Pozen, Robert and Rajgopal, Shivaram, Consequences of Mandatory Quarterly Reporting: The U.K. Experience (March 1, 2017). Columbia Business School Research Paper No. 17-33. Available at SSRN: https://ssrn.com/abstract=2817120 or http://dx.doi.org/10.2139/ssrn.2817120

Suresh Nallareddy (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Robert Pozen

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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