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The Effect of Reporting Streaks on Ex Ante Uncertainty

Author

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  • Thaddeus Neururer

    (George W. Daverio School of Accountancy, College of Business Administration, University of Akron, Akron, Ohio 44325)

  • George Papadakis

    (Office of Corporate Finance, U.S. Securities and Exchange Commission, Washington, District of Columbia 20549)

  • Edward J. Riedl

    (Accounting Department, Questrom School of Business, Boston University, Boston, Massachusetts 02215)

Abstract

This paper predicts and finds that investor uncertainty surrounding a key information release event—the earnings announcement—is decreasing in a firm’s reporting streak. We use two proxies related to investor ex ante uncertainty and corresponding pricing of such uncertainty: option-implied volatilities and variance risk premiums; both are measured with maturities surrounding the impending quarterly earnings announcement. Consistent with prior research, we measure reporting streak as the number of consecutive quarters the firm meets or beats the consensus analyst earnings-per-share forecast. Empirical results confirm expectations that the two uncertainty-related constructs are decreasing in the length of the reporting streak. These results, combined with further evidence documenting that lower uncertainty leads to lower stock returns surrounding the earnings announcements, suggest that longer reporting streaks reflect lower risk during earnings announcements.

Suggested Citation

  • Thaddeus Neururer & George Papadakis & Edward J. Riedl, 2020. "The Effect of Reporting Streaks on Ex Ante Uncertainty," Management Science, INFORMS, vol. 66(8), pages 3771-3787, August.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:8:p:3771-3787
    DOI: 10.1287/mnsc.2019.3320
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    References listed on IDEAS

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    Cited by:

    1. Neururer, Thaddeus, 2022. "Meet-or-beat streak heterogeneity and equity prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 455-470.

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