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Relative performance evaluation and the timing of earnings release

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  • Gong, Guojin
  • Li, Laura Yue
  • Yin, Huifang

Abstract

Relative performance evaluation (RPE) compensates managers on their relative performance against a peer group. Since observing more peers’ performance allows managers to better estimate the performance level required to achieve RPE targets, we conjecture that releasing earnings later than peers facilitates managers to achieve targets by exploiting last-minute reporting discretion. Empirical evidence is consistent with our conjecture. Further, managers tend to select peers that release earnings more timely and delay own firms’ earnings releases to be later than peers’ after RPE adoption. Our evidence suggests strategic timing of earnings release and discretionary reporting in response to relative performance evaluation.

Suggested Citation

  • Gong, Guojin & Li, Laura Yue & Yin, Huifang, 2019. "Relative performance evaluation and the timing of earnings release," Journal of Accounting and Economics, Elsevier, vol. 67(2), pages 358-386.
    • Handle: RePEc:eee:jaecon:v:67:y:2019:i:2:p:358-386
    DOI: 10.1016/j.jacceco.2019.03.002
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    Cited by:

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    2. Emmanuel Mamatzakis & Anna Bagntasarian, 2021. "The nexus between CEO incentives and analysts' earnings forecasts," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6205-6248, October.
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    5. Li, Guangzhong & Fujiyama, Keishi & Wu, Cen & Zheng, Ying, 2024. "Employment protection, corporate governance, and labor productivity around the World," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    6. Do, Truc & Zhang, Huai & Zuo, Luo, 2022. "Rocking the boat: How relative performance evaluation affects corporate risk taking," Journal of Accounting and Economics, Elsevier, vol. 73(1).
    7. Fu, Zheng & Ma, Yechi & Li, Suyang & Qiao, Lu, 2023. "Peer performance and the asymmetric timeliness of earnings recognition," International Review of Financial Analysis, Elsevier, vol. 85(C).
    8. SHEN, Yu & SHE, Kaiwen, 2024. "Loan origination and risk underpricing: The role of lending incentives," Finance Research Letters, Elsevier, vol. 62(PB).
    9. Yanrong Jia & Ananth Seetharaman & Yan Sun & Xu Wang, 2023. "Relative Performance Goals and Management Earnings Guidance," Journal of Business Ethics, Springer, vol. 183(4), pages 1045-1071, April.
    10. Harakeh, Mostafa & El-Gammal, Walid & Matar, Ghida, 2019. "Female directors, earnings management, and CEO incentive compensation: UK evidence," Research in International Business and Finance, Elsevier, vol. 50(C), pages 153-170.

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    More about this item

    Keywords

    Relative performance evaluation; Accounting-based performance target; Earnings release timing; Earnings management;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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