Prospect Theory and the Timeliness of the Earnings Announcements:Empirical Evidence from Listed Chinese Firms
Many empirical researches on timeliness of earnings announcements present the evidence for “good news early, bad news late. This paper goes further to divide an individual firm’s news contents into two aspects: unexpected earnings related to the prior year (news A) and unexpected earnings related to the industry-wide medium earnings (news B), and prove in theory that they play different roles in determining the announcement dates under the assumptions that shareholders are reference dependent, loss averse, and with diminishing sensitivity, as the prospect theory describes, and managers attempt to maximize shareholders’ evaluation on the firm’s value. We find that similar to pervious literatures, news A is negatively correlated with reporting lag, but what distinguishes this research from them is that we continue to find that it is news B that provides underlying motivation for managers to advance or delay earnings announcement dates, and the probability of delaying announcement is increasing with the difference between news B and news A. Finally, we find empirical evidences from listed Chinese firms to support our theoretical arguments.
Timeliness of earnings announcement Prospect theory Good news Bad news
Dengshi Huang Jia-nan Zhou
School of Economics and Management, Southwest Jiaotong University Chengdu, Sichuan, China, 610031
国际会议
西安
英文
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）