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

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  • FRANK GIGLER
  • CHANDRA KANODIA
  • HARESH SAPRA
  • RAGHU VENUGOPALAN

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.

Suggested Citation

  • Frank Gigler & Chandra Kanodia & Haresh Sapra & Raghu Venugopalan, 2014. "How Frequent Financial Reporting Can Cause Managerial Short‐Termism: An Analysis of the Costs and Benefits of Increasing Reporting Frequency," Journal of Accounting Research, Wiley Blackwell, vol. 52(2), pages 357-387, May.
  • Handle: RePEc:bla:joares:v:52:y:2014:i:2:p:357-387
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    File URL: https://doi.org/10.1111/1475-679X.12043
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    1. Chandra Kanodia & Haresh Sapra & Raghu Venugopalan, 2004. "Should Intangibles Be Measured: What Are the Economic Trade‐Offs?," Journal of Accounting Research, Wiley Blackwell, vol. 42(1), pages 89-120, March.
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    2. repec:gam:jsusta:v:8:y:2016:i:3:p:280:d:66034 is not listed on IDEAS
    3. Alfred Wagenhofer, 2014. "Trading off Costs and Benefits of Frequent Financial Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 52(2), pages 389-401, May.
    4. Armstrong, Margaret & D'Arrigo, Rafael & Petter, Carlos & Galli, Alain, 2016. "How resource-poor countries in Asia are securing stable long-term reserves: Comparing Japan's and South Korea's approaches," Resources Policy, Elsevier, vol. 47(C), pages 51-60.
    5. repec:eee:jaecon:v:64:y:2017:i:2:p:340-345 is not listed on IDEAS
    6. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9397-z is not listed on IDEAS
    7. repec:eee:finsta:v:37:y:2018:i:c:p:49-59 is not listed on IDEAS
    8. Marian Buil & Juan Pedro Aznar & Jorge Galiana & Alba Rocafort-Marco, 2016. "An Explanatory Study of MBA Students with Regards to Sustainability and Ethics Commitment," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-13, March.
    9. repec:kap:jbuset:v:157:y:2019:i:4:d:10.1007_s10551-018-3959-2 is not listed on IDEAS
    10. Robert Rieg, 2015. "Dynamics of value-based management: does shareholder value cause short-termism?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(2), pages 193-224, August.
    11. Pedro Verga Matos & Miguel Coelho, 2016. "Short-Termism In Euronext Lisbon: An Empirical Analysis," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 21(1), pages 49-76.
    12. Jia, Xue, 2016. "On the role of information disclosures in capital markets," Other publications TiSEM 9bacfbaa-2162-49fe-92e6-5, Tilburg University, School of Economics and Management.
    13. Satoshi Taguchi & Yoshio Kamijo, 2018. "Intentions behind disclosure to promote trust under short-termism: An experimental study," Working Papers SDES-2018-8, Kochi University of Technology, School of Economics and Management, revised Oct 2018.

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