Disclosure Timing of Accounting Information and Stock Market Reaction Under Asymmetric Information
Suh, Chung Woo
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https://hdl.handle.net/2142/71412
Description
Title
Disclosure Timing of Accounting Information and Stock Market Reaction Under Asymmetric Information
Author(s)
Suh, Chung Woo
Issue Date
1988
Doctoral Committee Chair(s)
Kwon, Young K.
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
This study explores a new aspect of timely reporting in a capital market where there is information asymmetry about firm quality between investors and managers. Timely reporting can be valuable to managers in that it can be used as a signal of firm quality. The study also offers a theoretical model which suggests an explanation for why some firms disclose their earnings reports earlier than do other firms. What differentiates this study from previous analytical studies is that the timing of mandatory earnings announcements is analyzed from a signaling perspective. The analysis is based on the conjecture that disclosure timing itself may have information content independent of the news type.
In the model, disclosure timing is a decision variable that may be used as a signal of a firm quality-type under asymmetric information. A perfectly separating signaling equilibrium is shown to exist for the model. In the signaling equilibrium, firm quality-type has an inverse relationship with disclosure time, regardless of the content of the news; and the equilibrium stock price is decreasing in disclosure time. This timing effect exists independent of news type. Finally, it is shown that different industries may have different equilibria--pooling or separating, depending on the cost structure of disclosure time or the quality difference. These results appear to support existing empirical evidence.
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