Financial Reporting Frequency and Managerial Learning from Stock Price

52 Pages Posted: 24 Jun 2020

See all articles by Stephen A. Hillegeist

Stephen A. Hillegeist

Arizona State University (ASU) - W. P. Carey School of Business, School of Accountancy

Asad Kausar

American University - Kogod School of Business

Arthur G. Kraft

City University London - Cass Business School

You-il (Chris) Park

University of Hawaii at Manoa - School of Accountancy

Date Written: May 31, 2020

Abstract

We provide evidence that increased reporting frequency enhances the extent to which stock prices guide managers’ investment decisions. Using a generalized difference-in-differences research design, we find the sensitivity of investment to stock price increased for Mandatory Adopters following an increase in reporting frequency over the period 1951-1974, relative to Voluntary Adopters. The results are concentrated among firms traded by more privately informed investors. Consistent with managers making better investment decisions when stock prices provide more investment-relevant information, we find managers at Mandatory Adopters with high levels of privately informed trading made relatively better investment decisions during the post-adoption period.

Keywords: financial reporting frequency, managerial learning, price informativeness

JEL Classification: M40, M41, G31

Suggested Citation

Hillegeist, Stephen A. and Kausar, Asad and Kraft, Arthur Gerald and Park, You-il (Chris), Financial Reporting Frequency and Managerial Learning from Stock Price (May 31, 2020). Available at SSRN: https://ssrn.com/abstract=3616579 or http://dx.doi.org/10.2139/ssrn.3616579

Stephen A. Hillegeist

Arizona State University (ASU) - W. P. Carey School of Business, School of Accountancy ( email )

Tempe, AZ 85287-3706
United States
480-965-6614 (Phone)

Asad Kausar

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States

Arthur Gerald Kraft

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain

You-il (Chris) Park (Contact Author)

University of Hawaii at Manoa - School of Accountancy ( email )

2404 Maile Way, C-402b
Honolulu, HI 96822
United States
8089567028 (Phone)

HOME PAGE: http://shidler.hawaii.edu/chris-park

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