Relative performance evaluation and the timing of earnings release

Guojin Gong, Laura Yue Li and Huifang Yin

Journal of Accounting and Economics, 2019, vol. 67, issue 2, 358-386

Abstract: Relative performance evaluation (RPE) compensates managers on their relative performance against a peer group. Since observing more peers’ performance allows managers to better estimate the performance level required to achieve RPE targets, we conjecture that releasing earnings later than peers facilitates managers to achieve targets by exploiting last-minute reporting discretion. Empirical evidence is consistent with our conjecture. Further, managers tend to select peers that release earnings more timely and delay own firms’ earnings releases to be later than peers’ after RPE adoption. Our evidence suggests strategic timing of earnings release and discretionary reporting in response to relative performance evaluation.

Keywords: Relative performance evaluation; Accounting-based performance target; Earnings release timing; Earnings management (search for similar items in EconPapers)
JEL-codes: G10 M12 M41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:67:y:2019:i:2:p:358-386

DOI: 10.1016/j.jacceco.2019.03.002

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