Reporting Frequency Choice and the Capital Market Consequences of Voluntary and Regulated Increases in Frequency

This study examines how financial reporting frequency affects the speed with which accounting information is reflected in price. The effect is ambiguous because disclosure frequency can influence the information-gathering activities of intermediaries and mandatory increases in disclosure can affect the propensity of firms to make voluntary disclosures. Based on 28,824 reporting-frequency observations for 1950-73, we find that annual earnings information is impounded into price more quickly for quarterly-reporters than semiannual-reporters. A subsample of firms that voluntarily increased reporting frequency from semiannual to quarterly reporting experienced improved timeliness, while firms whose increase was imposed by the SEC displayed less pronounced improvements. Results suggest that mandating more frequent reporting does not necessarily improve timeliness.