The effects of corporate disclosures on firms' information environments

• Main Author: Qi, Daqing Dave
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01-01-1996
• Subjects: Accounting
• ISBN: 9780591273533; 0591273535

This dissertation seeks to provide input into the debate on the effectiveness of corporate disclosures in financial reporting. It consists of two separate, but related papers that investigate the effects of corporate disclosures on firms' information environments. The first paper is an association study on the effects of corporate disclosures on market expectations of future earnings. It examines (1) whether stock prices anticipate earnings information earlier for firms with more informative disclosures than for firms with less informative disclosures, and (2) which alternative disclosure media contribute to such an earlier anticipation. Empirical results indicate that market-adjusted returns of firms with more informative disclosures start to reflect earnings changes 20 months prior to fiscal year end, about three months ahead of firms with less informative disclosures. This lead is statistically significant. Further analysis suggests that such an earlier anticipation of prices over earnings mainly results from investor relations, instead of annual reports, quarterly reports, analyst following, or other factors proxied by firm size. The second paper is an event study that investigates the effects of preemption and signal informativeness on the incremental information content of annual and 10-K reports. It addresses the following two research questions: (1) whether stock returns exhibit abnormal behavior in a three-day event period centered around the earlier of the dates on which the Securities and Exchange Commission (SEC) receives and makes available to the public annual reports to shareholders and 10-K reports, and (2) if abnormal returns behavior is not observed around the receipt and release of these SEC filings, what alternative explanations may account for its absence. Empirical results in general fail to detect abnormal returns behavior in the three-day event period. However, evidence consistent with the existence of incremental information content in the annual and 10-K reports is found in both the annual earnings announcement period and the period immediately before the event period, suggesting that firms have released either these reports or the most relevant information in these reports before filing them with the SEC.