Intraday disclosure timing deviations and their implications for financial reporting

Abstract

The same management team makes multiple reporting and disclosure decisions under similar incentives based on input from the same information system. We examine whether the way in which a firm makes minor disclosure decisions is a telltale sign for outsiders to evaluate seemingly unrelated but more consequential financial reporting decisions. We find that a firm that uses a different intraday window from its recent pattern to release an earnings announcement during a fiscal year (a minor decision) tends to report a larger magnitude of discretionary accruals for that year (a major decision). This association is attributable to both managerial opportunism and ineffective accounting information systems. These findings are driven by firms that temporarily deviate from their existing patterns instead of firms that appear to change their intraday release policies. Furthermore, firms with temporary deviations have significantly lower stock returns than firms without deviations in the one to six months after the last earnings announcement made in the fiscal year.