When are concurrent quarterly reports useful for investors? Evidence from ASC 606
53 Pages Posted: 27 Jul 2020 Last revised: 12 Feb 2021
Date Written: February 12, 2021
We examine whether concurrent quarterly reports help investors respond to earnings news when uncertainty is high. Although existing studies suggest that quarterly reports released concurrently with earnings depress trading due to information overload, 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 respond 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 in response to earnings news. We find the relation is stronger when firms face greater uncertainty and when firms include more discussion of revenue recognition. Our results suggest that concurrent quarterly reports are informative to investors when uncertainty is especially high.
Keywords: Voluntary disclosure, mandatory disclosure, information uncertainty, accounting change, ASC 606, earnings announcements
JEL Classification: G14, M41
Suggested Citation: Suggested Citation