Peer performance and the asymmetric timeliness of earnings recognition |
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| Institution: | 1. School of International Economics and International Relations, Liaoning University, China;2. School of Business, Northeast Normal University, China;3. Accounting, Finance and Economics Division, Coventry University London, UK;4. University of Leicester School of Business, University of Leicester, UK;5. Nottingham University Business School, University of Nottingham, UK;1. Department of Finance, School of Business, Hohai University, China;2. Department of Management Science and Engineering, School of Business, Hohai University, China;1. Hull University Business School, University of Hull, Hull HU67RX, United Kingdom;2. China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, China;1. Department of Economics, Management, and Statistics (DEMS), University of Milano-Bicocca, Piazza dell''Ateneo Nuovo, 1, 20126 Milano, MI, Italy;2. Department of Economics, University of Insubria, Varese, Italy;1. Business School, Sichuan University, Chengdu, China;2. School of Economics & Management, Southwest Jiaotong University, Chengdu, China;3. School of Economics and Finance, Xi''an Jiaotong University, Xi''an, China;4. School of Business and Management, Queen Mary University of London, London, United Kingdom |
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| Abstract: | This paper investigates the impact of peer performance on the asymmetric timeliness of earnings recognition. We find a positive relationship between peers' weak performance and timely bad news disclosure. Our results are robust to a variety of tests, including instrument variable approach, difference-in-differences analysis, alternative measures and subsample analysis. Consistent with the notion that weak peer performance increases investors' demand for information, the relationship is more profound for firms suffering from high information externality, with weak governance and high information asymmetry. Furthermore, we find that the relationship is difficult to reconcile with the explanation of managers' herding behaviour. In addition, we show that conservative accounting information disclosure due to weak peer performance alleviates managerial bad news hoarding and information asymmetry for underperforming firms, but distorts investment decisions for outperforming firms. We highlight the spillover effect of peer performance on conservative accounting information and the related heterogeneous outcomes. |
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