IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v56y2023ics1544612323005147.html
   My bibliography  Save this article

Does mandatory quarterly reporting induce managerial myopic behavior? Evidence from Japan

Author

Listed:
  • Koga, Yuya
  • Yamaguchi, Tomoyasu

Abstract

While quarterly reporting can provide timely information to investors and mitigate information asymmetry between managers and investors, it may also generate managerial myopic behavior. This study examines whether mandatory quarterly reporting induces managerial myopic behavior in Japanese firms. Using a difference-in-differences approach, we find that mandatory quarterly reporting is associated with an increase in managerial myopic behavior, proxied by real earnings management. We also find that this association is stronger for firms with higher foreign ownership. Our findings suggest that mandatory quarterly reporting encourages managerial myopic behavior, especially when market pressure is stronger.

Suggested Citation

  • Koga, Yuya & Yamaguchi, Tomoyasu, 2023. "Does mandatory quarterly reporting induce managerial myopic behavior? Evidence from Japan," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005147
    DOI: 10.1016/j.frl.2023.104142
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323005147
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.104142?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fu, Renhui & Kraft, Arthur & Zhang, Huai, 2012. "Financial reporting frequency, information asymmetry, and the cost of equity," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 132-149.
    2. Wurgler, Jeffrey, 2000. "Financial markets and the allocation of capital," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 187-214.
    3. Renhui Fu & Arthur Kraft & Xuan Tian & Huai Zhang & Luo Zuo, 2020. "Financial Reporting Frequency and Corporate Innovation," Journal of Law and Economics, University of Chicago Press, vol. 63(3), pages 501-530.
    4. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    5. Shrikant P. Jategaonkar & Linda M. Lovata & Xiaoxiao Song, 2023. "Growth opportunities and earnings management by cross-listed and U.S. firms," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(1), pages 157-183, March.
    6. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    7. Benedikt Downar & Jürgen Ernstberger & Benedikt Link, 2018. "The Monitoring Effect of More Frequent Disclosure," Contemporary Accounting Research, John Wiley & Sons, vol. 35(4), pages 2058-2081, December.
    8. Roychowdhury, Sugata & Shroff, Nemit & Verdi, Rodrigo S., 2019. "The effects of financial reporting and disclosure on corporate investment: A review," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    9. Brennan, Michael J & Cao, H Henry, 1997. "International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-1880, December.
    10. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    11. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    12. Chen, Yangyang & Rhee, S. Ghon & Veeraraghavan, Madhu & Zolotoy, Leon, 2015. "Stock liquidity and managerial short-termism," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 44-59.
    13. Katherine A. Gunny, 2010. "The Relation Between Earnings Management Using Real Activities Manipulation and Future Performance: Evidence from Meeting Earnings Benchmarks," Contemporary Accounting Research, John Wiley & Sons, vol. 27(3), pages 855-888, September.
    14. Kałdoński, Michał & Jewartowski, Tomasz, 2020. "Do firms using real earnings management care about taxes? Evidence from a high book-tax conformity country," Finance Research Letters, Elsevier, vol. 35(C).
    15. Sheard, Paul, 1989. "The main bank system and corporate monitoring and control in Japan," Journal of Economic Behavior & Organization, Elsevier, vol. 11(3), pages 399-422, May.
    16. Tomoyasu Yamaguchi, 2022. "Earnings management to achieve industry-average profitability in Japan," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(2), pages 402-431, March.
    17. John Asker & Joan Farre-Mensa & Alexander Ljungqvist, 2015. "Corporate Investment and Stock Market Listing: A Puzzle?," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 342-390.
    18. Alex Edmans & Mirko S. Heinle & Chong Huang, 2016. "The Real Costs of Financial Efficiency When Some Information Is Soft," Review of Finance, European Finance Association, vol. 20(6), pages 2151-2182.
    19. Robert Stoumbos, 2023. "The Growth of Information Asymmetry Between Earnings Announcements and Its Implications for Reporting Frequency," Management Science, INFORMS, vol. 69(3), pages 1901-1928, March.
    20. Roni Michaely & Michael R. Roberts, 2012. "Corporate Dividend Policies: Lessons from Private Firms," The Review of Financial Studies, Society for Financial Studies, vol. 25(3), pages 711-746.
    21. Hamao, Yasushi & Matos, Pedro, 2018. "U.S.-style investor activism in Japan: The first ten years?," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 29-54.
    22. Cohen, Daniel A. & Zarowin, Paul, 2010. "Accrual-based and real earnings management activities around seasoned equity offerings," Journal of Accounting and Economics, Elsevier, vol. 50(1), pages 2-19, May.
    23. Ge, Wenxia & Kim, Jeong-Bon, 2014. "Real earnings management and the cost of new corporate bonds," Journal of Business Research, Elsevier, vol. 67(4), pages 641-647.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wenjun Kuang, 2023. "Accounting comparability and the accuracy of management earnings forecasts in Japan," Discussion Papers in Economics and Business 23-07, Osaka University, Graduate School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haga, Jesper & Högholm, Kenneth & Sundvik, Dennis, 2022. "Peer firms’ reporting frequency and stock price synchronicity: European evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    2. Wil Martens & Prem W. S. Yapa & Maryam Safari, 2020. "The Impact of Financial Statement Comparability on Earnings Management: Evidence from Frontier Markets," IJFS, MDPI, vol. 8(4), pages 1-25, November.
    3. Yang, Jingwen & Hemmings, Danial & Jaafar, Aziz & Jackson, Richard H.G., 2022. "The real earnings management gap between private and public firms: Evidence from Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    4. Juan Pedro Sánchez‐Ballesta & José Yagüe, 2021. "Financial reporting incentives, earnings management, and tax avoidance in SMEs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(7-8), pages 1404-1433, July.
    5. Ahsan Habib & Dinithi Ranasinghe & Julia Yonghua Wu & Pallab Kumar Biswas & Fawad Ahmad, 2022. "Real earnings management: A review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4279-4344, December.
    6. Singh, Harjinder & Sultana, Nigar & Islam, Ariful & Singh, Abhijeet, 2022. "Busy auditors, financial reporting timeliness and quality," The British Accounting Review, Elsevier, vol. 54(3).
    7. Jiang, Haiyan & Hu, Yuanyuan & Zhang, Honghui & Zhou, Donghua, 2018. "Benefits of Downward Earnings Management and Political Connection: Evidence from Government Subsidy and Market Pricing," The International Journal of Accounting, Elsevier, vol. 53(4), pages 255-273.
    8. Viana, Jr., Dante Baiardo C. & Lourenço, Isabel & Black, Ervin L. & Martins, Orleans Silva, 2023. "Macroeconomic instability, institutions, and earnings management: An analysis in developed and emerging market countries," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).
    9. Min Liu, 2020. "Real and accrual-based earnings management in the pre- and post- engagement partner signature requirement periods in the United Kingdom," Review of Quantitative Finance and Accounting, Springer, vol. 54(3), pages 1133-1161, April.
    10. Kuo, Jing-Ming & Ning, Lutao & Song, Xiaoqi, 2014. "The Real and Accrual-based Earnings Management Behaviors: Evidence from the Split Share Structure Reform in China," The International Journal of Accounting, Elsevier, vol. 49(1), pages 101-136.
    11. Xie, Xinmei & Chang, Yu-Shan & Shiue, Min-Jeng, 2022. "Corporate life cycle, family firms, and earnings management: Evidence from Taiwan," Advances in accounting, Elsevier, vol. 56(C).
    12. Qin, Yiyi & Cai, Jun & Rhee, S. Ghon, 2021. "Do Japanese firms systematically inflate expected rate of returns from defined benefit pension plans?," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    13. Oz, Seda, 2024. "The impact of terrorist attacks and mass shootings on earnings management," The British Accounting Review, Elsevier, vol. 56(3).
    14. Chung, Yu-Hsuan & Pan, Lee-Hsien & Huang, Shaio Yan & Chen, K.C., 2015. "Do firms change earnings management behavior after receiving financial forecast warnings?," Global Finance Journal, Elsevier, vol. 27(C), pages 1-17.
    15. Xiaoying Deng & Seow Eng Ong, 2018. "Real Earnings Management, Liquidity Risk and REITs SEO Dynamics," The Journal of Real Estate Finance and Economics, Springer, vol. 56(3), pages 410-442, April.
    16. Jo, Eun Hye & Lee, Jung Wha, 2024. "Economic policy uncertainty and managerial short-termism," International Review of Financial Analysis, Elsevier, vol. 93(C).
    17. Al-Shattarat, Basiem & Hussainey, Khaled & Al-Shattarat, Wasim, 2022. "The impact of abnormal real earnings management to meet earnings benchmarks on future operating performance," International Review of Financial Analysis, Elsevier, vol. 81(C).
    18. Godsell, David & Huang, Kelly & Lao, Brent, 2023. "Managers’ rank & file employee coordination costs and real activities manipulation," Accounting, Organizations and Society, Elsevier, vol. 107(C).
    19. Biehl, Henrike & Bleibtreu, Christopher & Stefani, Ulrike, 2024. "The real effects of financial reporting: Evidence and suggestions for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    20. Mohamed Khalil & Sandy Harianto & Yilmaz Guney, 2022. "Do political connections reduce earnings management?," Review of Quantitative Finance and Accounting, Springer, vol. 59(1), pages 273-310, July.

    More about this item

    Keywords

    Quarterly reporting; Financial reporting frequency; Managerial myopic behavior; Real earnings management; Foreign ownership; Japan;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005147. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.