When are concurrent quarterly reports useful for investors? Evidence from ASC 606

62 Pages Posted: 27 Jul 2020 Last revised: 22 Apr 2022

See all articles by Jesse Glaze

Jesse Glaze

University of Texas at El Paso - Department of Accounting & Information Systems; University of Colorado at Boulder - Leeds School of Business

A. Nicole Skinner

University of Georgia - J.M. Tull School of Accounting

Andrew Stephan

University of Colorado at Boulder Leeds School of Business

Date Written: April 20, 2022

Abstract

Prior research suggests that quarterly reports released concurrently with earnings depress trading due to information overload. In this study, we predict that concurrent reports help investors trade when they face uncertainty about how to interpret earnings news. We rely on the implementation of ASC 606 as a quasi-exogenous increase in uncertainty about how to trade in response to earnings news. Specifically, we find that when uncertainty is high in the first quarter of ASC 606 implementation, 10-Qs released concurrently with earnings are associated with increased trading around the earnings announcement. We find the relation is more pronounced when investors face greater uncertainty about earnings and when firms increase disclosure more in their revenue recognition footnote. We also find some evidence that our results hold in a broader sample of accounting standard changes and generalize to other proxies for investor uncertainty. Our results suggest that concurrent quarterly reports are informative to investors when uncertainty about earnings is especially high.

Keywords: Voluntary disclosure, mandatory disclosure, information uncertainty, accounting change, ASC 606, earnings announcements

JEL Classification: G14, M41

Suggested Citation

Glaze, Jesse and Skinner, Ashley Nicole and Stephan, Andrew, When are concurrent quarterly reports useful for investors? Evidence from ASC 606 (April 20, 2022). Available at SSRN: https://ssrn.com/abstract=3639777 or http://dx.doi.org/10.2139/ssrn.3639777

Jesse Glaze

University of Texas at El Paso - Department of Accounting & Information Systems ( email )

University Library - Acquisitions Department
500 West University Avenue
El Paso, TX 79968
United States

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Ashley Nicole Skinner (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

Andrew Stephan

University of Colorado at Boulder Leeds School of Business ( email )

419 UCB
Boulder, CO 80309-0419
United States

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