Negative Externalities of Financial Reporting Frequency: Peer Reporting Choice and the Loss of Investor Attention
58 Pages Posted: 12 Aug 2019 Last revised: 22 Dec 2019
Date Written: August 5, 2019
This study examines whether one firm’s choice of reporting frequency generates negative externalities for other firms. We find that firms lose investor attention when more of their peers report quarterly instead of semi-annually, and such loss of attention is associated with a decrease in market value and market liquidity. Thus, firms experience negative externalities when their peers report quarterly. We find that the loss of attention is robust to alternative specifications, settings, and additional controls that capture other disclosures by peers. Finally, we test for, but fail to find, evidence of positive externalities in the form of information spillovers. Overall our evidence suggests that firms are negatively impacted when their peers choose to adopt a higher reporting frequency.
Keywords: Financial Reporting Frequency, Investor Attention, Spillovers
JEL Classification: G10, M41, M48
Suggested Citation: Suggested Citation