Journal of Accounting and Public Policy 23 (2004) 457482 www.elsevier.

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Disclosure timing: Determinants of quarterly earnings release dates

Partha Sengupta
*
Robert H. Smith School of Business, University of Maryland, College Park, Van Munching Hall, MD 20742, United States

Abstract Existing research on discretionary disclosures provides valuable insights on the potentials causes and consequences of alternative forms of disclosure. However, relatively little is known about how managers choose to time the release of nancial information. This paper focuses on the quarterly earnings release dates and investigates why some choose to release earnings information relatively early, compared to others. The results indicate that the reporting lag (days between scal period end and quarterly earnings release date) is shorter for rms facing greater demand for information from investors and greater litigation costs. The reporting lag, however, is longer for rms with greater block ownership and those whose operations are somewhat more complex. 2004 Elsevier Inc. All rights reserved.
JEL classication codes: M41; D82 Keywords: Disclosure timing; Earnings announcement date

Corresponding author. Tel.: +1 301 405 8928; fax: +1 301 314 9414. E-mail address: psengupt@rhsmith.umd.edu

0278-4254/$ - see front matter 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.jaccpubpol.2004.10.001

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1. Introduction A large stream of research has evolved in recent years exploring corporate disclosure choices. This research, well summarized by Healy and Palepu (2001), Core (2001) and Verrecchia (2001), examines managements disclosure though earnings and sales forecasts, nancial statements and associated footnotes, conference calls, analysts presentations, and websites. The literature provides valuable insights on the causes and consequences of alternative forms of corporate disclosure. However, researchers have devoted limited attention to analyzing how managers choose to time the release of nancial information. In this paper I investigate how company managers decide when to release quarterly earnings information. Corporate disclosures take various forms but the quarterly earnings announcement is probably one of the most highly anticipated events and receives signicant media and investor attention. Research consistently shows that the market assimilates more and more of the information in earnings as the announcement date approaches (see Kothari, 2001; for a survey of this research starting with Ball and Brown, 1968). Hence, the extent to which an earnings announcement will provide useful information to market participants should be a function not only of the nature of information released but also when it is released. Consequently, the Financial Accounting Standards Board, in dening the primarily qualities that make accounting information useful, highlighted timeliness to be an important factor dened as: . . . having information available to decision makers before it loses its capacity to inuence decisions, is an ancillary aspect of relevance. If information is not available when it is needed or becomes available so long after the reported events that it has no value for future action, it lacks relevance and is of little or no use (FASB, Statement of Accounting Concept No. 2, p. 5). Recently, in an eort to provide more timely accounting information to market participants, the SEC changed the deadlines for ling annual and quarterly reports for companies with a public oat of at least $75 million. Eective November 15, 2002, the ling deadline for annual reports are being reduced gradually from 90 days to 60 days over 3 years, whereas the deadline for ling quarterly reports are being reduced from 45 days to 35 days. 1 Disclosure literature generally posits that a rms optimal disclosure strategy would be determined by the costs and benets of disclosure. Based on an

1 See SEC Release No. 33-8128: Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports.

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assessment of these costs and benets rm managers should decide on the nature and content of information to be disclosed, the timing of disclosures, medium of disclosures, venue etc. This argument suggests that managers should set the earnings release date based on their evaluation of potential benets (and costs) of releasing earnings information relatively quickly. I investigate whether the nature of investor base, litigation costs, accounting complexity, and proprietary costs, impact DELAY, which is dened as the number of days after scal period end that managers release quarterly earnings information. Results support most of the hypotheses developed in the paper. First, I nd that DELAY is shorter for rms with greater trading volume and greater institutional ownership, and longer for rms with greater block ownership. This is consistent with the argument that rms respond to pressures from investors to release earnings quickly. Firms that have large block ownership, however, are less susceptible to such pressures. 2 Second, I nd that DELAY is shorter for technology rms and those having a greater percentage of outside directors on its board. Both variables could capture the eects of litigation costs. Prior research had identied technology rms to be those potentially having greater litigation risk (for example, Francis et al., 1994 and Kaznik and Lev, 1995). Board of directors should also be sensitive to litigation risk since such lawsuits often name the directors as defendants. Lawsuits also cause investors and regulators to evaluate the eectiveness of the board more carefully. Shareholder lawsuits typically allege that the rm had private information that it failed to release in a timely manner suggesting that rms facing greater litigation risk would have incentives to release earnings relatively early. Third, I document that DELAY is longer for rms reporting multiple segments, undergoing acquisitions, and reporting special items suggesting that rms with greater accounting complexity generally take longer to release earnings information. Finally, I investigated whether rms facing proprietary costs have incentives to delay the earnings release. Using alternative measures of proprietary costs I nd somewhat mixed evidence of the potential association between DELAY and such costs. 3 The paper can be viewed as making a contribution to two interrelated streams of research. Firstly, it extends the discretionary disclosure literature by focusing on the disclosure timing decision, a dimension of corporate disclosure policy that has been relatively neglected by researchers. Results indicate that costs and benets of disclosure not only aect the nature of information

2 Blockholders may have private sources of information and thus may not pressure the company to release earnings information quickly. 3 I also included certain control variables to capture the eects of size, market uncertainty and the nature of earnings news on earnings release dates.

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to be disclosed but also the timing of such disclosure. The ndings of this paper may be helpful in evaluating the consequences of the SECs recently implemented change in the ling deadlines for quarterly and annual reports. For example, the fact that the reporting lag is found to be negatively associated with certain variables such as trading volume, institutional ownership, number of shareholders and rm size, is consistent with the view of SECs supporters who perceive the reduction in the reporting deadline to result in more ecient operations of capital markets. However, the reporting lag is also found to be positively associated with measures of business complexity suggesting that some companies facing large information processing costs may produce less reliable nancial information in an eort to meet the shorter deadline. Secondly, this paper extends a line of research that had focused on comparing actual release dates of earnings to expected (or pre-announced) release dates in order to examine if early announcements conveyed good news and late announcements bad news. This research includes Givoly and Palmon (1982), Chambers and Penman (1984), Kross and Schroeder (1984), Begley and Fischer (1998) and Bagnoli et al. (2002) and consistently shows that delayed earnings are associated with bad news. These papers also documented somewhat weaker evidence to suggest that good news was announced earlier than expected. These papers can be viewed as addressing the question why a rm may deviate from a pre-committed disclosure strategy, but does not directly address the question of how company managers plan on when to release their earnings information, which is the focus of the current study. I nd that analysts forecast error continues to explain the variation in actual earnings announcement dates but the other measures included explain a signicant portion of the variation in DELAY beyond analysts forecast error (average R2 of over 20%). 4 The rest of the article is organized as follows. Section 2 develops proxies to explain the reporting lag (DELAY) based on prior literature on discretionary disclosure, and describes the sample used for the study. Section 3 reports the empirical results and the last section provides some concluding remarks.

In this paper I use the number of days between scal year end and actual earnings release date as the dependent variable. Thus my measure of DELAY is a combination of expected or planned delay which has been less addressed in prior research and unexpected delay which has been the focus of a number of prior studies. Bagnoli et al. (2002), however, had documented that approximately 74% of the rms in their sample released earnings exactly on the day they had earlier committed to and another 13% released earnings one day earlier or later. Thus the primary dierence in the reporting delay across rms in my sample can be attributed to variations in the expected reporting delay.

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2. Research design 2.1. Determinants of reporting lag This research explores the potential determinants of reporting lag dened as: DELAY days between the fiscal year-end and fourth quarter earnings release date:
5

Firm managers have some discretion in choosing the earnings release date. As with any discretionary disclosure choice, it is expected that company management will determine the timing of earnings release based on an evaluation of the costs and benets of releasing earnings early versus late. Recent studies have identied a number of costs and benets of discretionary disclosure choices (see Healy and Palepu (2001) and Core (2001) for recent surveys of the empirical research on disclosures and Verrecchia (2001) for a survey of the theoretical work). Here, I examine the potential impact of the demand pressure from investors, litigation costs, proprietary costs, and the degree of complexity of nancial reporting on the reporting lag. Disclosure literature had also consistently associated discretionary disclosure measures to rm size, market uncertainty and the nature of information released. I incorporate controls for these factors. The choice of the variables is explained below. 2.1.1. Investor base Prior research has found evidence to suggest that rms respond to investor demands for greater discretionary disclosure (Bushee and Noe, 2000; Bushee et al., 2003). Investors are likely to be concerned about receiving timely information from rms they are investing in. Their demand for timely disclosures should be greater when they are trading more frequently suggesting that DELAY could be negatively associated with trading volume. Consistent with this, Botosan and Harris (2000) found that rms are more likely to initiate segment disclosures when trading volume had declined, and Bushee et al. (2003) documented that rms that are choosing to make open conference calls have greater trading volume. Demand for timely disclosures could also be higher for rms that have greater number of shareholders outstanding. When ownership is widely dispersed, public disclosures are the most eective method of communicating private information to market participants. I include the following two measures to capture this:

5 I focus initially on fourth quarter earnings release dates because data on certain variables such as institutional ownership, block ownership, board of directors and number of segments were available only on an annual basis. Analyses based on report dates for the rst three quarters yielded similar results and these are discussed in Section 3.4.

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VOL total number of shares traded over the fiscal year divided by total shares outstanding at fiscal year end: SHRHOLD log of number of shareholders of the company minus log of mean number of shareholders of firms in the same asset decile: Research also documents a positive association between discretionary disclosure and institutional ownership (Healy et al., 1999; Bushee and Noe, 2000; Ajinkya et al., 2004). This research argues that institutions continuously demand nancial information from rms and rms yield to pressure from these investors by making more frequent earnings forecasts and providing more detailed information in nancial reports. In order to capture the role of institutional ownership I include the following variable: INST percentage of common shares held by financial institutions: Assuming that institutions would prefer earnings information to be released as quickly as possible, a negative association between DELAY and INST is expected. It has been argued that blockholders monitor a rms operations reducing agency costs and increasing rm value (Morck et al. (1988), McConnell and Servaes (1990), Barclay and Holderness (1991), and Bethel et al. (1998)). One possible implication of this is that in the presence of large block ownership other market participants may feel less of a need to get timely information from the company. Alternatively, it is possible that blockholders would have access to private information and so in order to maintain their information advantage they might discourage timely and detailed public disclosures. 6 Both alternatives suggest a positive association between block ownership and the reporting lag. Hein and Shaw (2000) documented that rms with greater blockholder ownership have larger quoted spreads and smaller quoted depths in the market suggesting that blockholder ownership may be associated with greater information asymmetry. Ajinkya et al. (2004) showed further that concentrated institutional ownership is negatively associated with the probability of issuing a management forecast. Block ownership is dened as: BLOCK percentage of shares held by blockholdersowners with at least 5% stake in the company:

6 It is expected that blockholders that are aliated with the company would be more likely to have access to private information about the companys performance. However, all blockholders, by virtue of their large share ownership, could demand and have access to some private information. Thus Ajinkya et al. (2004) argues that institutions with large equity ownership in a company act as insiders although they may not be aliated with the company.

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Based on earlier ndings I suggest that the reporting lag (DELAY) is positively associated with block ownership (BLOCK). 7 2.1.2. Litigation costs Skinner (1994) had argued that the threat of lawsuits arising from large negative earnings surprises provide managers with incentives to pre-disclose the information in order to reduce litigation costs. In support of this hypothesis Skinner (1994, 1997) documented that rms with bad news are more likely to pre-disclose compared to those with good news. Timely disclosures are likely play an important role in reducing litigation costs. In a stock based litigation the debated issue is often whether the company revealed proper information without delay so early announcements could help reduce the probability of litigation and potential damages to be incurred if a lawsuit does arise. In this paper I suggest the following measure of litigation costs: TECH 1 if the firm belongs to Drugs COMPUSTAT SIC codes 28332836; R&D Services 87318734; Programming 73717379; Computers 35703577; Electronics 36002674; and 0 otherwise: Kaznik and Lev (1995) had used this variable to capture litigation risk. They found that TECH rms are more likely to warn investors of an earnings surprise supporting the argument that litigation risk provide incentives for early disclosures. The variable is also similar to the classication used in Francis et al. (1994) to identify rms facing high litigation risk. If TECH eectively captures litigation risk and rms perceive early disclosure to reduce potential litigation costs, DELAY should be negatively associated with TECH. 8

In conducted separate analysis using INSIDER (the percentage of shares of the company held by insiders) as an alternative to BLOCK. Similar to BLOCK, INSIDER could capture the eects of agency costs and private information ows. The results based on INSIDER (not reported) were similar to those obtained for BLOCK. 8 Although Skinners work supports the view that managers consider early dissemination of information to reduce litigation risk, other research had provided some mixed evidence. Thus, Francis et al. (1994) identied rms in specic industries such as computers, drugs etc. that are likely to face high litigation risk due to large drop in earnings and compared disclosure behavior of these rms to a control group. They found no evidence to suggest that the disclosures were driven by potential litigation costs. A couple of recent studies went further to show that litigation risk may in fact reduce the probability of discretionary disclosures. Thus Johnson et al. (2001) documented a signicant increase in forward looking forecasts by a group of high-tech rms after the passage of the Private Securities Litigation Reform Act of 1995, which gave management protection from lawsuits relating to nancial projections. Baginski et al. (2002) showed that Canadian rms are more likely to issue earnings forecasts compared to US rms, presumably because the Canadian securities laws make it relatively more dicult for investors to win class action lawsuits.

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Class action lawsuits often name corporate board members as defendants. Board members may be charged for being passive and not performing their duciary duties of protecting investor interests by monitoring rm performance and facilitating timely disclosures about the rms progress. Unlike company managers who could generate private benets from delaying disclosures, board members who are not insiders usually have little to gain from selective or delayed disclosures. On the other hand, they may bear large reputation costs and possibly monetary costs if litigation arises. This suggests that outside directors would have incentives to encourage timely release of information in an eort to minimize litigation costs. This line of reasoning is consistent with a broader stream of research that argues that independent directors bear a reputation cost that leads them to monitor management actions more carefully and take actions in the interest of shareholders (for example, Fama and Jensen, 1983; Weisbach, 1988; Borokhovich et al., 1996). Within the accounting literature, Beasley (1996) provided evidence that outsider-dominated boards reduce the likelihood of nancial statement fraud; Klein (2002) showed that rms with greater percentage of outsiders on the board are less likely to manage earnings, and Ajinkya et al. (2004) documented that rms with greater percentage of outside directors are more likely to issue earnings forecasts and make more frequent forecasts. In this study I use the following measure to capture the role of outside directors: OUTDIR percentage of the board that are not also officers of the company: Based on the arguments above I expect OUTDIR to be negatively associated with DELAY. 2.1.3. Proprietary costs A number of researchers have suggested that a rms disclosure decision could be aected by its concern that market competitors can use the information revealed to cut into the prots of the disclosing rm (e.g., Verrecchia, 1983; Wagenhofer, 1990; Feltham and Xie, 1992). Firms facing such proprietary costs may not only have incentives to withhold certain types of sensitive information (Scott (1994) found evidence that the propensity to disclose pension plan related information was negatively associated with measures capturing labor market power) but may also have incentives to delay the release of nancial information that can be used by competing rms or regulators. Bamber and Cheon (1998) examined the association between proxies for proprietary costs (market to book and sales concentration) and forecast specicity and forecast venue. They found somewhat weak evidence to support the proprietary cost hypothesis. The following two measures of proprietary costs used in this study are based on Bamber and Cheon (1998):

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MKBK the ratio of market value of equity to book value of equity at the end of the fourth quarter: CONS sales of the five largest firms within a two-digit SIC code divided by total sales of all firms within the two-digit SIC code: If companies with high proprietary costs perceive that such costs can be reduced through delayed earnings release, we would expect a positive association between the reporting lag and both MKBK and CONS. 2.1.4. Accounting complexity The reporting lag could also be aected by the companys nancial and accounting complexity. I use the following three measures to capture the nature of the rms complexity: DIVERSE 1; if the company had more than one reportable segment; 0; otherwise: NACQUIRE number of acquisitions made by the company during the fourth quarter: SPECIAL 1; if the company had reported non-zero special items in the fourth quarter; 0; otherwise: DIVERSE is meant to capture the fact that a multi-segment rm could be more complex resulting in longer information processing time to create nancial statements. NACQUIRE captures acquisition activities in the last quarter which could also delay the reporting of earnings as combined and pro-forma numbers may have to be generated. Lastly, companies reporting special items may also require longer processing time as the auditor may need additional time to examine the validity of these charges. SPECIAL is included to capture this. 9

I also examined certain other variables that could capture the rms accounting complexity. One such variable was operating cycle which is the average time between purchasing or acquiring inventory and receiving cash from its sales. Managers of rms with shorter operating cycles may be able to process nancial information relatively quickly and may thus release earnings information quickly. A second variable was operating leverage which was captured by the ratio of xed assets to total assets. Companies with greater operating leverage may take longer to allocate xed overhead costs and consequently make take longer to report the earnings gures. In the regressions, however, none of these two variables were statistically signicant suggesting that measures already included are capturing a large part of the cross-sectional dierences in the accounting complexity of the rms in the sample.

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2.1.5. Control variables Disclosure literature consistently nds that factors such as rm size and business uncertainty are linked to alternative measures of disclosures (e.g., Lang and Lundholm, 1993; Frankel et al., 1995; Frankel et al., 1999; Botosan and Harris, 2000; Bushee et al., 2003). The following two measures are included to capture size and risk eects: LSALE log of total sales for the fiscal year: STDRETN standard deviation of daily stock returns computed over the fourth quarter:
10

Research by Kross and Schroeder (1984), Begley and Fischer (1998), Bagnoli et al. (2002) and others have consistently documented that the unexpected delay in releasing earnings is longer for rms disclosing bad news. These studies have typically measured bad news by comparing the reported earnings with median analyst forecast of earnings. Following this research I add BADNEWS as another control variable dened as follows: BADNEWS 1; if actual reported fourth quarter EPS is less than the median analyst forecast; 0; otherwise:
11

Prior work has also provided some evidence to indicate that loss rms are less likely to disclose information than other rms. Thus Ajinkya et al. (2004) found that loss rms are less likely to release earnings forecasts whereas Choi and Ziebart (2001) showed that loss rms are more likely to issue biased forecasts. These ndings, however, are counter to Skinner (1994, 1997) who argued that rms have incentives to disclose bad news quickly to reduce potential litigation costs. Skinners work would suggest that LOSS would be negatively associated with DELAY. I include LOSS as a potential control variable dened as: LOSS 1; if the firm reported zero or negative EPS before extraordinary items for the fourth quarter; 0; otherwise:

I examined alternative measures of information uncertainty such as dispersion in analysts forecasts and these yielded similar results. I selected STDRETN over analyst forecast based measures primarily because of the rather large drop in sample size that resulted from restricting the analysis to rms with at least 3 or 5 analysts following. 11 A number of alternative measures of forecast error were examined such as ERROR1=(actual EPSmedian analyst forecasted EPS)/price, and, ERROR2=absolute value(actual EPSmedian analyst forecasted EPS)/price. Ultimately BADNEWS was selected over the other two choices for a couple of reasons. First, prior research consistently links unexpected delay to bad news but provides somewhat mixed results for good news so the actual forecast error which includes both good news and bad news seems less appropriate. Second, the variable BADNEWS had the most explanatory power in the regressions. Regressions were re-run with ERROR1 and ERROR2 and this did not alter any of the conclusions relating to the other variables used to explain DELAY.

10

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Given the conicting evidence about the potential link between DELAY and LOSS I do not predict the sign of the coecient of LOSS. Analysis of the various determinants of DELAY is performed using the following regression: DELAY a0 a1 VOL a2 SHRHOLD a3 INST a4 BLOCK a5 TECH a6 OUTDIR a7 MKBK a8 CONS a9 DIVERSE a0 NACQUIRE a11 SPECIAL a12 LSALE a13 STDRETN a14 BADNEWS a15 LOSS e The expected signs are: a1 < 0, a2 < 0, a3 < 0, a4 > 0, a5 < 0, a6 < 0, a7 > 0, a8 > 0, a9 > 0, a10 > 0, a11 > 0, a12 < 0, a13 > 0, a14 > 0, and a15 = ?. 2.2. Sample selection The main sample for the study consists of 11,071 rm-year observations collected as follows (see panel A of Table 1 for a summary of the sample selection procedure). First, fourth-quarter earnings report dates were collected from First Call for the years 19952000, resulting in an initial sample of 19,992 observations. 12 The sample was restricted to fourth-quarter earnings primarily because some variables such as segment information, listing of board of directors and ocers, institutional ownership, and, block ownership were available only on an annual basis. Tests were conducted to examine the sensitivity of the reported results to this restriction and these are discussed in Section 3.4. In the second stage, 1350 observations were deleted because the report date was either within 7 days of the scal year-end or more than 90 days after the scal yearend. This screen was set primarily to eliminate potential errors in report dates and some extreme outliers, yielding 18,642 remaining observations. In the next stage, nancial data to compute the independent variables were collected from various databases. Financial analysts EPS forecasts were obtained from First Call. 1421 observations were eliminated since some First Call analyst forecast data were unavailable. Financial data required to compute the independent variables were primarily collected from CRSP and COMPUSTAT databases. 3833 observations were deleted due to lack of information in CRSP and COMPUSTAT to compute the requisite independent variables. Finally, data on board of directors, ocers, institutional ownership and block ownership were obtained from the June edition of Compact Disclosure for each of

12 The results using the First Call report dates were compared to those available from COMPUSTAT. The results reported in this paper were qualitatively similar to those obtained using COMPUSTAT report dates.

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Table 1 Sample selection and description Number of observations Panel A: Sample selection criteria Initial sample of fourth quarter reporting dates for the period 19952000 Less: Earnings release date not within 790 days after scal yearend First Call data needed to compute analysts forecast error unavailable Financial data from CRSP and COMPSTAT missing Ownership data and ocers and directors information unavailable Final sample Panel B: Time series distribution of the reporting lag (DELAY)* 1995 1996 1997 1998 1999 Mean Median 35.62 33 37.27 36 39.06 37 42.36 41 41.37 40 19,992

(1350) (1421) (3833) (2317) 11,071

2000 41.53 39

Panel A of this table reports the sample selection screens and Panel B reports the mean and median values for DELAY (the number of days between the scal year end and fourth quarter earnings

the years 19952000. Compact Disclosure collects board of directors and ocer information from the latest available proxy statement and block ownership and institutional ownership from Spectrum. Compact Disclosure information was missing for 2317 of the remaining observations, resulting in the nal sample of 11,071 observations. Panel B of Table 1 reports the year-by-year distribution of reporting lag (DELAY). The table shows a slight increasing trend in mean and median reporting lag over 19951998 after which it declines slightly. This is in contrast to Givoly and Palmon (1982) which documented a reduction in reporting lag over time (their sample period was 19601974) with the median delay going down from 63 to 37 days. During 19951998 the median lag increases from 33 days to 41 days but in 2000 it declines to 39 days. The comparison of reporting lag between these two studies suggests that the reduction in reporting lags, arising probably from improvements in the technology of communications over time, may have stabilized in recent years. Table 2 reports the summary statistics for the regression variables. The median DELAY for the sample period is 38 days. There is also substantial variation in DELAY across the sample as indicated by the standard deviation, which is over 16, and by the inter-quartile range, which is 22 days. Average block ownership is about 39%, and the average board consists of about 64% non-ocers (or outsiders). While not reported in the table, average asset size was about $2.9 billion.

P. Sengupta / Journal of Accounting and Public Policy 23 (2004) 457482 Table 2 Summary statistics Variable DELAY VOL SHRHOLD INST BLOCK TECH OUTDIR MKBK CONS DIVERSE NACQUIRE SPECIAL LSALE STDRETN BADNEWS LOSS Mean 39.34 1.50 1.12 41.40 38.80 0.21 63.80 4.01 0.47 0.27 0.66 0.29 5.60 0.04 0.36 0.28 Median 38.00 1.00 0.99 40.22 35.69 0.00 71.43 2.08 0.47 0.00 0.00 0.00 5.57 0.03 0.00 0.00 STD 16.48 1.59 1.67 25.14 27.60 0.41 25.46 22.72 0.17 0.44 1.54 0.45 1.81 0.02 0.48 0.45 Q1 27.00 0.55 2.16 20.66 16.97 0.00 55.56 1.31 0.36 0.00 0.00 0.00 4.45 0.02 0.00 0.00 Q3

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49.00 1.84 0.09 61.10 57.36 0.00 81.82 3.56 0.58 1.00 1.00 1.00 6.72 0.05 1.00 1.00

This table provides summary statistics for the key variables based on a sample of 11,071 observations pooled over the years 19952000. DELAY equals the number of days between the scal year end and fourth quarter earnings release date. VOL is the trading volume for the scal year divided by shares outstanding at the end of the scal year. SHRHOLD is the natural log of number of shareholders of the company minus log of mean number of shareholders of rms in the same asset decile computed using scal year end data. INST is the percentage of the companys common shares held by institutions. BLOCK is the percentage of common shares of the company held by blockholders. TECH equals 1 if the rm belongs to Drugs (COMPUSTAT SIC codes 2833 2836), R&D Services (87318734), Programming (73717379), Computers (35703577) and Electronics (36003674); 0 otherwise. OUTDIR represents the percentage of the board of directors that are not ocers of the company. MKBK is the ratio of market value of equity to book value of equity at the end of the scal quarter. CONS is the ratio of total sales of the top ve rms within a two-digit SIC code to total sales of all rms within the two-digit SIC code. DIVERSE equals 1 if the company reports more than one primary segment, 0 otherwise. NACQUIRE is the total number of acquisitions made by the company during the scal fourth quarter. SPECIAL equals 1 if COMPUSTAT reported non-zero special items for the fourth quarter; 0 otherwise. LSALE is the log of total sales for the scal year. STDRETN is the standard deviation of daily stock returns over the scal fourth quarter. BADNEWS equals 1 if the actual reported quarterly EPS is less than the median analyst forecast before the earnings release, 0 otherwise. LOSS equals 1 if the rm reports a loss for the fourth quarter, 0 otherwise.

3. Results 3.1. Reporting lag and analysts disclosure ratings Before proceeding to the tests of the determinants of DELAY, I examined whether DELAY is correlated with nancial analysts disclosure ratings. If nancial analysts value timely earnings releases then rms with shorter DELAY should be associated with better disclosure quality ratings developed

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by these analysts. If the correlation between the two is extremely high, variables that have been found to be associated with disclosure measures will also likely to be correlated with DELAY so one may argue that a separate analysis of the determinants of DELAY is not informative. In order to examine this issue I use nancial analysts disclosure ratings obtained from the Association for Investment Management and Research (AIMR)s annual Report of the Financial Analysts Federation Corporate Information Committee. These disclosure ratings have been used in prior studies such as Lang and Lundholm (1993) and Sengupta (1998) as aggregate measures of corporate disclosure quality. 13 I used data for the period 19911995 collected from the AIMRs annual reports. 14 The disclosure ratings were then matched with fourth quarter report dates obtained from First Call resulting in a sample of 1350 observations for which a total disclosure quality rating (out of 100 points) were available. 15 For a sub-sample of 1004 observations, the AIMR also provided separate disclosure ratings based on disclosure in annual reports, quarterly reports and other published information, and through communications with nancial analysts (investor relations). For these sub-groups separate correlation coecients are also provided. Panel A of Table 3 reports the correlations between DELAY and raw analysts ratings. The correlation coecients are all negative as expected. The correlation between the annual reports score and DELAY is not statistically signicant but the correlation between DELAY and the other two sub-category scores, and the total score are statistically signicant at the 0.01 level. Panels B and C report correlations between DELAY and disclosure ratings, subject to some transformations. Lang and Lundholm (1993) had pointed out that companies in dierent industries are rated by dierent groups of analysts, possibly using dierent criteria, suggesting that the scores may not necessarily be comparable across industries. In an attempt to deal with this problem, two types of transformations were performed. Panel B reports correlations based on variables that are computed as deviations from industry means. In Panel C, correlations are based on standardized variables calculated as the deviation from industry mean divided by the standard deviation of the variable within the industry. The correlations based on these transformations are consistently negative and all are statistically signicant at the 0.05 level or less. Overall, the results are consistent with the argument that disclosure timing is considered to be a positive attribute of corporate disclosure quality. However the correlations are in the range of 0.03 to 0.14 suggesting that factors that that have

See Lang and Lundholm (1993) for a description of the AIMR disclosure ratings. The Association for Investment Management and Research discontinued their evaluation of rms disclosure practices in 1995 so the correlation analysis could not be performed over the 1995 2000 sample period used for the rest of the analyses of the paper. 15 The AIMR published disclosure ratings for only a select group of 300400 rms each year.
14

13

P. Sengupta / Journal of Accounting and Public Policy 23 (2004) 457482 Table 3 Correlations between DELAY and analysts disclosure ratings Annual Reports Panel A: Correlations Coecient p-value No. of observations based on raw data 0.03801 0.2289 1004 Quarterly reports and other published info 0.09373 0.003 1004 Investor relations 0.14352 <0.0001 1004 0.10852 0.0006 1004 0.11898 0.0002 1004 Total score

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0.12876 <0.0001 1350 0.11717 <0.0001 1350 0.13731 <0.0001 1350

Panel B: Correlations based on deviations from industry mean Coecient 0.12617 0.07389 p-value <0.0001 0.0192 No. of observations 1004 1004 Panel C: Correlations Coecient p-value No. of observations based on standardized variables 0.10114 0.07145 0.0013 0.0236 1004 1004

This table reports the correlations between DELAY (the number of days between the scal year end and fourth quarter earnings release date) and nancial analysts disclosure ratings provided by the Association for Investment Management and Research (AIMR). Correlation coecients are calculated based on ratings data available for the period 19911995 from the annual AIMR reports. Reported correlation coecients are followed by the p-values for two-tailed tests and the number of observations. Wherever AIMR had provided separate disclosure scores of companies based on disclosure in annual reports, quarterly reports and other published information, and through communications with nancial analysts (investor relations), separate correlation coecients are provided for the sub-categories. Correlations between DELAY and total disclosure scores (subcategory scores) were computed based on a sample of 1350 (1004) observations. Panel A reports the correlations between DELAY and analysts ratings. Since companies in dierent industries are rated by dierent groups of analysts, possibly using dierent criteria, two types of industry adjustment were also performed. Correlations in Panel B are reported based on variables that are computed as deviations from industry means. In Panel C, correlations are based on standardized variables (= (variable mean)/(standard deviation)). For the purpose of industry adjustment for calculations in Panels B and C industries are as identied in the AIMR reports.

been used to explain disclosure ratings (in prior literature) may not necessarily explain the timing of earnings release. 3.2. Determinants of cross-sectional variation in reporting lags The primary results of the determinants of DELAY are reported in Table 4. Column 3 of the table reports the regression results based on the full sample of 11,071 observations for the period 19952000. Since the data are pooled over 6 years and some rms may be appearing in multiple years, the results could be potentially aected as the observations may not all be independent. Thus separate year-by-year results are provided in columns 49 to check the sensitivity of the results to pooling of observations over time. The regression

Table 4 Cross-sectional determinants of DELAY Independent variables Predicted sign Pooled 19952000 INTERCEPT Investor base VOL SHRHOLD INST BLOCK Litigation costs TECH OUTDIR Proprietary costs MKBK CONS Accounting complexity DIVERSE NACQUIRE ? 49.4247 (53.322)** 0.7098 (6.973)** 0.3991 (4.668)** 0.0406 (6.402)** 0.0320 (5.819)** 5.5631 (13.940)** 0.0374 (6.681)** 0.0085 (1.187) 2.2749 (2.569)** 3.9470 (12.281)** 0.6694 (6.803)** Year-by-year 1995 46.3198 (16.779)** 0.4136 (1.471) 0.1649 (0.601) 0.0466 (2.487)** 0.0302 (1.865)* 4.5472 (4.164)** 0.0659 (4.304)** 0.0066 (1.643) 1.7226 (0.800) 5.8883 (5.651)** 0.5950 (1.631) 1996 38.8364 (15.643)** 0.1474 (0.542) 0.0262 (0.096) 0.0855 (5.044)** 0.0515 (3.577)** 5.1271 (4.955)** 0.0302 (2.851)** 0.0139 (0.622) 9.0445 (4.075)** 3.0992 (3.006)** 1.0785 (3.848)** 1997 47.4652 (19.363)** 0.8239 (3.960)** 0.2981 (1.176) 0.0483 (3.029)** 0.0219 (1.550) 3.9182 (3.897)** 0.0246 (2.278)* 0.0091 (0.924) 8.4583 (3.596)** 4.2640 (4.372)** 0.8549 (3.845)** 1998 59.0027 (28.253)** 1.3389 (6.155)** 0.5940 (3.013)** 0.0200 (1.507) 0.0125 (1.149) 6.3636 (7.721)** 0.0768 (4.833)** 0.0151 (1.974)* 0.5412 (0.297) 2.3327 (3.538)** 0.5410 (3.524)** 1999 56.9846 (23.562)** 0.6829 (2.904)** 0.2952 (1.982)* 0.0262 (2.036)* 0.0161 (1.317) 7.3688 (8.317)** 0.0818 (4.450)** 0.0006 (0.034) 1.4841 (0.680) 2.7144 (4.068)** 0.5855 (2.948)** 2000 58.7097 (19.439)** 0.7772 (2.876)** 0.4537 (1.917)* 0.0355 (2.000)* 0.0352 (2.460)** 4.7075 (4.362)** 0.0397 (1.971)* 0.0859 (1.208) 1.9202 (0.787) 2.7384 (3.475)** 0.1975 (0.585)

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SPECIAL Other variables/controls LSALE STDRETN BADNEWS LOSS Number of observations Adjusted R2

1.8792 (5.733)** 2.6073 (26.090)** 104.6048 (10.999)** 2.9884 (9.410)** 3.4795 (8.790)** 11,071 0.21

1.6434 (1.790)* 1.9165 (6.799)** 131.5877 (2.899)** 1.1738 (1.504) 2.7161 (2.372)** 1543 0.14

1.3215 (1.537) 1.7063 (6.245)** 126.2725 (3.419)** 1.1028 (1.400) 5.1546 (4.644)** 1691 0.18

0.9064 (1.121) 2.5502 (9.844)** 88.5512 (2.529)** 1.7239 (2.136)* 2.4664 (2.376)** 1780 0.17

2.0029 (2.926)** 3.1284 (15.221)** 102.5720 (5.082)** 4.2791 (6.296)** 3.1732 (3.975)** 2367 0.26

2.0146 (2.791)** 2.7825 (12.964)** 47.0988 (2.712)** 5.5318 (7.271)** 4.4814 (5.225)** 2103 0.23

3.1107 (3.655)** 3.1809 (11.572)** 35.1383 (1.626) 5.1414 (6.083)** 2.1297 (2.181)* 1587 0.22

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This table reports results of the regression DELAY a0 a1 VOL a2 SHRHOLD a3 INST a4 BLOCK a5 TECH a6 OUTDIR a7 MKBK a8 CONS a9 DIVERSE a10 NACQUIRE a11 SPECIAL a12 LSALE a13 STDRETN a14 BADNEWS a15 LOSS e DELAY equals the number of days between the scal year end and fourth quarter earnings release date. VOL is the trading volume for the scal year divided by shares outstanding at the end of the scal year. SHRHOLD is the natural log of number of shareholders of the company minus log of mean number of shareholders of rms in the same asset decile computed using scal year end data. INST is the percentage of the companys common shares held by institutions. BLOCK is the percentage of common shares of the company held by blockholders. TECH equals 1 if the rm belongs to Drugs (COMPUSTAT SIC codes 28332836), R&D Services (87318734), Programming (73717379), Computers (35703577) and Electronics (36003674); 0 otherwise. OUTDIR represents the percentage of the board of directors that are not ocers of the company. MKBK is the ratio of market value of equity to book value of equity at the end of the scal quarter. CONS is the ratio of total sales of the top ve rms within a two-digit SIC code to total sales of all rms within the two-digit SIC code. DIVERSE equals 1 if the company reports more than one primary segment, 0 otherwise. NACQUIRE is the total number of acquisitions made by the company during the scal fourth quarter. SPECIAL equals 1 if COMPUSTAT reported non-zero special items for the fourth quarter; 0 otherwise. LSALE is the log of total sales for the scal year. STDRETN is the standard deviation of daily stock returns over the scal fourth quarter. BADNEWS equals 1 if the actual reported quarterly EPS is less than the median analyst forecast before the earnings release, 0 otherwise. LOSS equals 1 if the rm reports a loss for the fourth quarter, 0 otherwise. OLS regression coecients are followed by t-values in parentheses based on Whites heteroscedasticity adjusted covariance matrix. **indicates statistical signicance at 0.01 level and *indicates statistical signicance at 0.05 level (one-tailed tests, except for INTERCEPT).

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coecients reported in the table are followed by t-statistics which are based on Whites (1980) heteroscedasticity corrected covariance matrix. For the regression based on pooled data all variables have their expected signs and coecients are statistically signicant at the 0.01 level, except for MKBK, which is positive as expected but not statistically signicant. The coecients for LOSS turn out to be negative and statistically signicant at 0.01 level which is consistent with the ndings of Choi and Ziebart (2001) and Ajinkya et al. (2004). The results of the year-by-year regressions are largely consistent with the ndings based on pooled data with one primary exception; the coecient for CONS, used as a measure of proprietary costs, is statistically signicant in 1996 and 1997 only. For the other years, the coecient is not statistically signicant. Overall, the results provide strong support of most of the hypotheses presented earlier. Thus DELAY is found to be negatively associated with measures of investor base (trading volume, number of shareholders and institutional ownership) consistent with the argument that companies yield to pressure from investors to release earnings information quickly. A positive association between DELAY and BLOCK is found suggesting that as company ownership gets concentrated management is less susceptible to pressure from outside to release earnings information quickly. The negative association between DELAY and TECH would be consistent with the argument that rms facing litigation costs are more likely to release earnings numbers quickly. While TECH has been used in the prior literature as a proxy for litigation costs it could also capture other factors (for example the high tech rms may have also invested heavily in information technology resulting in quick processing of nancial information) which could explain the results. The negative association between DELAY and OUTDIR provides further support of the litigation cost argument since outside directors have little to gain from delaying disclosures but can be named in lawsuits arising from lack of disclosures or delayed disclosures. My analysis, however, provides little support of the proprietary cost hypothesis as the coecient for MKBK is not statistically signicant in the regressions and CONS (the other proxy for proprietary costs), is statistically signicant only in the regression using the pooled data. One possible explanation for the weaker ndings relating to the proprietary cost incentives is that the measures used may not be eectively capturing proprietary costs. For example, MKBK would be greater for high growth rms which could be associated with greater stock price volatility and consequently high litigation risk (which is expected to be negatively associated with DELAY). Another potential explanation is that rms may not perceive early release of earnings to generate suciently high costs. This could be due to the fact that the earnings information has to be released within a certain deadline anyway and companies are free to choose the nature and content of any additional information they provide with the earnings release (rms facing high proprietary costs may

P. Sengupta / Journal of Accounting and Public Policy 23 (2004) 457482

475

choose to provide minimal supplementary information with earnings but may not choose to delay the earnings release). The measures of accounting complexity all turn out to be strongly associated with DELAY. As expected I found that the reporting lag is longer for rms that are diversied, completed acquisitions, and those that reported special items on their income statement. Thus DELAY is longer for companies that are inherently more complex or those that had to deal with certain complex transactions. The control variables (log of sales, standard deviation of stock returns, and BADNEWS) all turned out to be as expected indicating that the reporting lag is longer for smaller rms, those with greater market volatility and those reporting bad news. Adjusted R2s for the regressions ranged from 14% to 26% with the average 2 R being about 21%, suggesting that the variables included, explain a signicant portion of the cross-sectional variation in the reporting lag. The R2 of 21% for the pooled regression could be compared to that of about 3% that would be obtained if DELAY was regressed on BADNEWS (analysts forecast error dummy) only. 16 Thus, the variables identied in this study, signicantly adds to our understanding of the determinants of DELAY, beyond forecast error identied in prior research. 17 3.3. Further analysis of special items Results reported in Table 4 indicated that the reporting lag is longer for rms reporting non-zero special items, after controlling for other potential determinants of DELAY. Given this nding, one may wonder if DELAY is affected by the size of special items and their sign (i.e., if they are income increasing or income decreasing). I investigate this by running regression (1) with the following two alternative measures for SPECIAL: SPECIAL1 special items=sales: SPECIAL2 absolute value of special items=sales: The results of this analysis are reported in Table 5. The table indicates that neither SPECIAL1 nor SPECIAL2 are statistically signicant in the regressions. 18 These ndings, in conjunction with those reported in Section 3.2

Regressions using alternative measures of forecast error such as (actual EPS median analyst forecast)/price generated even lower R2. 17 Of course prior research used analyst forecast errors to explain unexpected changes in the reporting lag and not the actual reporting lag which is the focus of this study. 18 Separate year-by-year regression results (not reported) did not provide any conclusive pattern either.

16

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Table 5 Eect of size and nature of special items on DELAY Independent variables INTERCEPT Investor base VOL SHRHOLD INST BLOCK Litigation costs TECH OUTDIR Proprietary costs MKBK CONS Accounting complexity DIVERSE NACQUIRE SPECIAL1 SPECIAL2 Other variables/controls LSALE STDRETN BADNEWS LOSS Number of observations Adjusted R2 This table reports results of the regression Predicted sign ? Model 1 49.0051 (52.824)** 0.7045 (6.871)** 0.3974 (4.631)** 0.0401 (6.312)** 0.0328 (5.950)** 5.5297 (13.831)** 0.0368 (6.574)** 0.0077 (1.078) 2.1430 (2.417)** 3.9840 (12.365)** 0.6989 (7.070)** 0.0820 (0.517) Model 2 49.0139 (52.835)** 0.7058 (6.891)** 0.3972 (4.627)** 0.0400 (6.296)** 0.0327 (5.935)** 5.5307 (13.836)** 0.0368 (6.576)** 0.0078 (1.079) 2.1438 (2.418)** 3.9843 (12.365)** 0.6992 (7.075)**

+ +

+ + + +

0.0051 (0.033) 2.4929 (25.174)** 106.7562 (11.165)** 3.0265 (9.511)** 4.0653 (10.640)** 11,071 0.21 2.4946 (25.186)** 106.7999 (11.160)** 3.0268 (9.512)** 4.0799 (10.707)** 11,071 0.21

+ + ?

P. Sengupta / Journal of Accounting and Public Policy 23 (2004) 457482 Table 5 (continued) DELAY a0 a1 VOL a2 SHRHOLD a3 INST a4 BLOCK a5 TECH a6 OUTDIR a7 MKBK a8 CONS a9 DIVERSE a10 NACQUIRE a11 SPECIAL a12 LSALE a13 STDRETN a14 BADNEWS a15 LOSS e

477

with alternative measures of SPECIAL. In Model 1, SPECIAL1 is the absolute value of special items reported for the fourth quarter divided by sales for the fourth quarter. In Model 2, SPECIAL2 is the ratio of special items reported in the fourth quarter divided by sales of the fourth quarter. Other variables are dened as follows. DELAY equals the number of days between the scal year end and fourth quarter earnings release date. VOL is the trading volume for the scal year divided by shares outstanding at the end of the scal year. SHRHOLD is the natural log of number of shareholders of the company minus log of mean number of shareholders of rms in the same asset decile computed using scal year end data. INST is the percentage of the companys common shares held by institutions. BLOCK is the percentage of common shares of the company held by blockholders. TECH equals 1 if the rm belongs to Drugs (COMPUSTAT SIC codes 28332836), R&D Services (87318734), Programming (73717379), Computers (35703577) and Electronics (36003674); 0 otherwise. OUTDIR represents the percentage of the board of directors that are not ocers of the company. MKBK is the ratio of market value of equity to book value of equity at the end of the scal quarter. CONS is the ratio of total sales of the top ve rms within a two-digit SIC code to total sales of all rms within the two-digit SIC code. DIVERSE equals 1 if the company reports more than one primary segment, 0 otherwise. NACQUIRE is the total number of acquisitions made by the company during the scal fourth quarter. LSALE is the log of total sales for the scal year. STDRETN is the standard deviation of daily stock returns over the scal fourth quarter. BADNEWS equals 1 if the actual reported quarterly EPS is less than the median analyst forecast before the earnings release, 0 otherwise. LOSS equals 1 if the rm reports a loss for the fourth quarter, 0 otherwise. OLS regression coecients are followed by t-values in parentheses based on Whites heteroscedasticity adjusted covariance matrix. **indicates statistical signicance at 0.01 level and *indicates statistical signicance at 0.05 level (onetailed tests, except for INTERCEPT).

earlier seem to imply that whereas the presence of special items seem to aect the reporting lag, the size of these special items and their directional eect on income, does not seem to aect the reporting lag. 3.4. Analysis with rst, second and third quarter earnings release dates The results reported in earlier sections were based on DELAY measured as the number of days after scal year-end that fourth quarter earnings were released. This was primarily done since ownership and board information were available on an annual basis. In this section I re-estimate Eq. (1) using quarterly data for the rst three quarters to see if the factors that explained part of the variation in fourth quarter reporting lag could also explain variation in reporting lag for the other three quarters. In order to conduct this analysis, VOL, MKBK, CONS, LSALE and STDRETN are now measured using data for the appropriate quarter. The results, reported in Table 6, are very similar to those reported in Table 4 based on fourth quarter reporting lag. Apart from

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Table 6 Determinants of DELAY using rst, second, and third quarter earnings announcement dates Independent variables INTERCEPT Investor base VOL SHRHOLD INST BLOCK Litigation costs TECH OUTDIR Proprietary costs MKBK CONS Accounting complexity DIVERSE NACQUIRE SPECIAL Other variables/controls LSALE STDRETN BADNEWS LOSS Number of observations Adjusted R2 This table reports results of the regression Predicted sign ? Quarter 1 26.9074 (51.617)** 72.1197 (3.636)** 0.4390 (8.258)** 0.0302 (7.660)** 0.0146 (4.166)** 2.9106 (12.394)** 0.0110 (3.108)** 0.0002 (1.200) 0.0711 (0.123) 1.8756 (9.368)** 0.3640 (5.342)** 0.5463 (1.951)* 0.8614 (13.585)** 40.3729 (6.210)** 1.7509 (8.151)** 2.3667 (8.979)** 9823 0.12 Quarter 2 27.8083 (54.396)** 99.2120 (5.075)** 0.3559 (6.989)** 0.0274 (7.278)** 0.0185 (5.548)** 2.8051 (11.694)** 0.0123 (3.581)** 0.0008 (0.245) 1.1317 (2.036) 2.0619 (10.568)** 0.4303 (6.306)** 0.9978 (4.192)** 0.8902 (14.067)** 35.0604 (5.595)** 1.8536 (9.462)** 2.5915 (10.309)** 10,482 0.13 Quarter 3 27.4618 (56.913)** 119.1584 (6.335)** 0.4043 (8.155)** 0.0316 (8.481)** 0.0170 (5.219)** 2.8209 (12.390)** 0.0118 (3.555)** 0.0056 (1.142) 0.9022 (1.680) 1.7503 (9.313)** 0.3898 (5.651)** 0.9258 (4.099)** 0.9108 (15.048)** 36.7253 (7.887)** 1.7167 (9.341)** 2.7132 (11.034)** 10,808 0.15

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P. Sengupta / Journal of Accounting and Public Policy 23 (2004) 457482 Table 6 (continued) DELAY a0 a1 VOL a2 SHRHOLD a3 INST a4 BLOCK a5 TECH a6 OUTDIR a7 MKBK a8 CONS a9 DIVERSE a10 NACQUIRE a11 SPECIAL a12 LSALE a13 STDRETN a14 BADNEWS a15 LOSS e

479

DELAY equals the number of days between the scal quarter end and quarterly earnings release date (for quarters 1, 2 and 3). VOL is the trading volume for the scal quarter divided by shares outstanding at the end of the scal quarter. SHRHOLD is the natural log of number of shareholders of the company minus log of mean number of shareholders of rms in the same asset decile. INST is the percentage of the companys common shares held by institutions. BLOCK is the percentage of common shares of the company held by blockholders. TECH equals 1 if the rm belongs to Drugs (COMPUSTAT SIC codes 28332836), R&D Services (87318734), Programming (73717379), Computers (35703577) and Electronics (36003674); 0 otherwise. OUTDIR represents the percentage of the board of directors that are not ocers of the company. MKBK is the ratio of market value of equity to book value of equity at the end of the scal quarter. CONS is the ratio of total sales of the top ve rms within a two-digit SIC code to total sales of all rms within the two-digit SIC code. DIVERSE equals 1 if the company reports more than one primary segment, 0 otherwise. NACQUIRE is the total number of acquisitions made by the company during the scal quarter. SPECIAL equals 1 if COMPUSTAT reported non-zero special items for the quarter; 0 otherwise. LSALE is the log of total sales for the scal quarter. STDRETN is the standard deviation of daily stock returns over the scal quarter. BADNEWS equals 1 if the actual reported quarterly EPS is less than the median analyst forecast before the earnings release, 0 otherwise. LOSS equals 1 if the rm reports a loss for the current quarter, 0 otherwise. OLS regression coecients are followed by t-values in parentheses based on Whites heteroscedasticity adjusted covariance matrix. **indicates statistical signicance at 0.01 level and *indicates statistical signicance at 0.05 level (one-tailed tests, except for INTERCEPT).

MKBK and CONS all other variables have their expected signs and are statistically signicant at conventional levels. The coecient for MKBK is not statistically signicant in any of the regressions (which is consistent with the results reported for fourth quarter) whereas the coecient for CONS turns out to be negative and statistically signicant for quarters 2 and 3 (it is positive is quarter 1 but not statistically signicant). Overall, the results of Table 6 indicate that factors found to be associated with the reporting lag in fourth quarter earnings delay are also associated with the reporting lag of the other quarters. 3.5. Sensitivity analysis I performed a battery of tests to examine whether the results presented above are sensitive to the choice of variables, sample, and outliers. First, as a robustness check, I re-estimated regression (1) using an alternative sample where only rms with at least three analysts following were kept. Tests run on this reduced sample (sample size was about 60% of that reported in Table 4) using coecient of variation of analyst forecasts as the uncertainty measure (instead of STDRETN) showed every variable to be statistically signicant at

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the 0.01 level except the analyst dispersion measure and CONS, both of which came out weakly signicant (statistically signicant at the 0.1 level). I also ran the analysis after eliminating extreme values of all variables (top and bottom one percent of all variable were eliminated) and the results turned out to be qualitatively similar to those reported in Table 4. Finally, tests of multicollinearity revealed no signicant problems. 4. Conclusions This paper investigated why certain rms choose to release their quarterly earnings information relatively quickly compared to others. Results indicated that the nature of investor base, litigation costs, accounting complexity, and earnings news, are related to the reporting lag which was dened as the number of days after scal quarter end the company released its earnings. Broadly speaking, the paper makes a contribution by attempting to understand rms disclosure timing choice. This line of enquiry is useful since timing is an important dimension of disclosure that could aect the usefulness (relevance) of the disclosed information. More specically, this paper extends a line of research that had consistently documented a negative association between the unexpected changes in earnings announcement dates and nature of the news (as measured by analysts forecast errors). By examining a large number of factors beyond analysts forecast error, this paper attempts to provide a more comprehensive understanding of how managers plan to time the release the earnings information. Subsequent research could explore potential determinants of release dates of other voluntary disclosures such as managements earnings forecasts. Acknowledgment I would like to thank Bipin Ajinkya, Oliver Kim, Taewoo Park, James Peters and Mike Peters for comments and suggestions on an earlier draft. I also thank Thompson Financial for generously providing the First Call analyst forecast data through their Academic program. References
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