Relative Performance Evaluation and the Timing of Earnings Release

Posted: 25 Mar 2019

See all articles by Guojin Gong

Guojin Gong

Penn State University - Smeal College of Business

Laura Yue Li

University of Illinois at Urbana-Champaign

Huifang Yin

Shanghai University of Finance and Economics

Date Written: March 1, 2019

Abstract

Relative performance evaluation (RPE) compensates managers on their relative performance against a peer group. Since observing more peers’ performance allows managers to better estimate the performance level required to achieve RPE targets, we conjecture that releasing earnings later than peers facilitates managers to achieve targets by exploiting last-minute reporting discretion. Empirical evidence is consistent with our conjecture. Further, managers tend to select peers that release earnings more timely and delay own firms’ earnings releases to be later than peers’ after RPE adoption. Our evidence suggests strategic timing of earnings release and discretionary reporting in response to relative performance evaluation.

Keywords: Relative performance evaluation, Accounting-based performance target, Earnings release timing, Earnings management

JEL Classification: G10, M12, M41

Suggested Citation

Gong, Guojin and Li, Yue Laura and Yin, Huifang, Relative Performance Evaluation and the Timing of Earnings Release (March 1, 2019). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=3344898

Guojin Gong

Penn State University - Smeal College of Business ( email )

University Park, PA 16802
United States
814-863-7055 (Phone)

Yue Laura Li (Contact Author)

University of Illinois at Urbana-Champaign ( email )

283 Wohlers hall 1206 South Sixth Street
1206 South Sixth Street
Champaign, IL 61820
United States
2172655086 (Phone)

Huifang Yin

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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