When are concurrent quarterly reports useful for investors? Evidence from ASC 606

Jesse L. Glaze (), A. Nicole Skinner () and Andrew Stephan ()
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Jesse L. Glaze: University of Texas at El Paso
A. Nicole Skinner: Terry College of Business, University of Georgia
Andrew Stephan: University of Colorado Boulder

Review of Accounting Studies, 2024, vol. 29, issue 2, No 10, 1360-1406

Abstract: Abstract Prior research suggests that quarterly reports released concurrently with earnings depress trading due to information overload. In this study, 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 trade in response 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 around the earnings announcement. We find the relation is more pronounced when investors face greater uncertainty about earnings and when firms increase disclosure in their revenue recognition footnote. We also find some evidence that our results hold in a broader sample of accounting standard changes and generalize to other proxies for investor uncertainty. Our results suggest that concurrent quarterly reports are informative to investors when uncertainty about earnings is especially high.

Keywords: Mandatory disclosure; Information uncertainty; Accounting change; ASC 606; Earnings announcements; Concurrent reporting (search for similar items in EconPapers)
JEL-codes: G14 G30 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11142-022-09744-7

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