How Frequent Financial Reporting Can Cause Managerial Short‐Termism: An Analysis of the Costs and Benefits of Increasing Reporting Frequency

Frank Gigler; Chandra Kanodia; Haresh Sapra; Raghu Venugopalan

doi:10.1111/1475-679x.12043

Journal of Accounting Research Vol. 52 No. 2 2014

How Frequent Financial Reporting Can Cause Managerial Short‐Termism: An Analysis of the Costs and Benefits of Increasing Reporting Frequency

Frank Gigler¹; Chandra Kanodia¹; Haresh Sapra²; Raghu Venugopalan³

¹ University of Minnesota · ² University of Chicago Booth School of Business · ³ University of Illinois at Urbana–Champaign

Abstract

We develop a cost–benefit tradeoff that provides new insights into the frequency with which firms should be required to report the results of their operations to the capital market. The benefit to increasing the frequency of financial reporting is that it causes market prices to better deter investments in negative net present value projects. The cost of increased frequency is that it increases the probability of inducing managerial short‐termism. We analyze the tradeoff between these costs and benefits and develop conditions under which greater reporting frequency is desirable and conditions under which it is not.

DOI: 10.1111/1475-679x.12043
Volume: 52
Issue: 2
Pages: 357-387
Language: en
Sources: bibtex:phds-export.bib openalex crossref

How Frequent Financial Reporting Can Cause Managerial Short‐Termism: An Analysis of the Costs and Benefits of Increasing Reporting Frequency

Abstract

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