The Timing of Earnings Announcements: An Examination of the Strategic Disclosure Hypothesis

The Accounting Review, Vol. 84, No. 1, 2009

44 Pages Posted: 22 Jun 2007 Last revised: 9 Jul 2009

See all articles by Jeffrey T. Doyle

Jeffrey T. Doyle

Utah State University

Matthew J. Magilke

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: March 25, 2008

Abstract

Beginning with Patell and Wolfson (1982), several papers have documented that earnings announcements made after the market closes and/or on Fridays tend to contain worse earnings news than those made at other times. One hypothesis is that opportunistic managers release earnings at these times of decreased media attention to "hide" their bad news and reduce the associated market penalty. Using firm-level tests that focus on only those firms that switch their disclosure timing (rather than consistently report at the same time), we find no evidence that managers opportunistically report worse news after the market closes or on Fridays. We then explore other determinants of the timing decision, including the more benign hypothesis that managers with worse earnings news release earnings after the market closes to more broadly disseminate the information. Consistent with desiring more time for the market to assimilate the announcement, we find some evidence that more complex firms tend to announce earnings after the market closes. We also find that these announcements are associated with greater abnormal volume, possibly indicating a successful dissemination strategy. We also find that the corporate headquarters location, the size of the firm, the number of analysts covering the firm, and industry membership are all significant explanatory variables for the timing decision. Overall, our findings are consistent with efficient capital markets that are effective at monitoring new information, regardless of the time of the announcement.

Keywords: strategic disclosure, earnings announcements, disclosure timing, market efficiency

JEL Classification: M41, M45

Suggested Citation

Doyle, Jeffrey T. and Magilke, Matthew J., The Timing of Earnings Announcements: An Examination of the Strategic Disclosure Hypothesis (March 25, 2008). The Accounting Review, Vol. 84, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=995580

Jeffrey T. Doyle (Contact Author)

Utah State University ( email )

College of Business
Logan, UT 84322-3540
United States

Matthew J. Magilke

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

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