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Financial reporting frequency and earnings information spillovers around the world



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Working Paper

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We provide the first evidence on whether financial reporting frequency impacts investor responses to news about global industry earnings, by exploiting variation in firm-level reporting frequency across 32 countries. We use the high frequency quarterly earnings announcements of US industry bellwethers to proxy for news about global industry fundamentals and document that the returns of stocks around the world react to quarterly US bellwether earnings news. Strikingly, the reaction of stocks around the world to US bellwether earnings news is stronger for low reporting frequency (“LRF”) firms in quarters when they do not report earnings. Moreover, the reactions of LRF firms to these announcements are followed by return reversals when LRF firms eventually report their own earnings, suggesting that their initial response was an overreaction. Further analyses reveals that reactions are much stronger to negative US bellwether news relative to positive news, especially among low reporting frequency stocks in quarters when they do not report earnings. Overall, our findings suggest that low reporting frequency exacerbates information spillovers and sheds new light on the consequences of infrequent financial reporting from a global perspective.


Working Paper

Available on ECCH


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