Asymmetric Timeliness in Earnings: Insights from Earnings Disaggregation

48 Pages Posted: 27 Jan 2021

See all articles by Andrew B. Jackson

Andrew B. Jackson

UNSW Australia Business School, School of Accounting

Yaowen Shan

University of Technology Sydney (UTS) - School of Accounting; Financial Research Network (FIRN)

Stephen L. Taylor

University of Technology Sydney (UTS) - School of Accounting; University of Technology Sydney; Centre for International Finance and Regulation (CIFR)

Date Written: November 23, 2020

Abstract

We revisit the asymmetric timeliness of earnings as proposed by Basu (1997). For a large sample of US firm years from 1970-2019, we show that earnings are asymmetrically timely with respect to bad economic news, and that this is robust to the declining timeliness of good news, different time periods, changes in accounting standards and changes in sample firms. When we disaggregate earnings into its market, industry and firm idiosyncratic sources, it is apparent that asymmetrical timeliness is restricted to the idiosyncratic component. This result supports the argument in Watts (2003), that asymmetric timeliness is primarily a response to information asymmetry issues in contracts that rely on accounting information.

Keywords: Capital markets, Conservatism, Asymmetric Timeliness, Earnings-return relation, Negative returns, Market, Industry, Profitability, Firm-specific estimates

JEL Classification: D82, G14, M41, N20

Suggested Citation

Jackson, Andrew B. and Shan, Yaowen and Taylor, Stephen L., Asymmetric Timeliness in Earnings: Insights from Earnings Disaggregation (November 23, 2020). Available at SSRN: https://ssrn.com/abstract=3736277 or http://dx.doi.org/10.2139/ssrn.3736277

Andrew B. Jackson (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Yaowen Shan

University of Technology Sydney (UTS) - School of Accounting ( email )

P.O. Box 123
Broadway NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Stephen L. Taylor

University of Technology Sydney (UTS) - School of Accounting

P.O. Box 123
Broadway NSW 2007
Australia
+612 9514 3437 (Phone)

University of Technology Sydney ( email )

UTS Business School
PO Box 123 Broadway
Sydney, NSW 2007
Australia
61295143437 (Phone)
61295143513 (Fax)

Centre for International Finance and Regulation (CIFR) ( email )

Level 7 UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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