Effects of increased reporting frequency on nonprofessional investors' earnings predictions

Abstract

More frequent financial reporting has been a topic of debate for many years. However, little evidence exists about the possible effects of more frequent reporting on investors' decision making. Using a between-subjects experiment, this study analyzes how altering the timing or frequency of earnings reports-weekly, as opposed to quarterly, reports-affects the accuracy and dispersion of earnings predictions by nonprofessional investors. This is important, since regulators have identified nonprofessionals as a significant audience for financial reports. I hypothesize and find that more frequent reporting results in less accurate predictions and greater variance, particularly when a strong seasonal pattern exists. Finally, investors in the more-frequent reporting condition self-reported that they were more influenced by older historical data-suggesting primacy effects-while those in the less-frequent reporting condition self-reported that they were more influenced by the newer historical data, suggesting recency effects.