Peer performance and the asymmetric timeliness of earnings recognition

Zheng Fu, Yechi Ma, Suyang Li and Lu Qiao

International Review of Financial Analysis, 2023, vol. 85, issue C

Abstract: This paper investigates the impact of peer performance on the asymmetric timeliness of earnings recognition. We find a positive relationship between peers' weak performance and timely bad news disclosure. Our results are robust to a variety of tests, including instrument variable approach, difference-in-differences analysis, alternative measures and subsample analysis. Consistent with the notion that weak peer performance increases investors' demand for information, the relationship is more profound for firms suffering from high information externality, with weak governance and high information asymmetry. Furthermore, we find that the relationship is difficult to reconcile with the explanation of managers' herding behaviour. In addition, we show that conservative accounting information disclosure due to weak peer performance alleviates managerial bad news hoarding and information asymmetry for underperforming firms, but distorts investment decisions for outperforming firms. We highlight the spillover effect of peer performance on conservative accounting information and the related heterogeneous outcomes.

Keywords: Peer effect; Accounting conservatism; Information asymmetry; Crash risk; Governance (search for similar items in EconPapers)
JEL-codes: G10 G38 M41 M48 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:85:y:2023:i:c:s1057521922003775

DOI: 10.1016/j.irfa.2022.102427

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