Relative performance evaluation and the timing of earnings release |
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| Institution: | 1. Smeal College of Business, Pennsylvania State University, PA, USA;2. Gies College of Business, University of Illinois at Urbana-Champaign, IL, USA;3. School of Accountancy, Shanghai University of Finance and Economics, Shanghai, PR China;1. Terry College of Business, University of Georgia, USA;2. Edwin L. Cox School of Business, Southern Methodist University, USA;1. Booth School of Business, The University of Chicago, United States;2. Fuqua School of Business, Duke University, Durham, United States;3. Carlson School of Management, University of Minnesota, United States;1. Tuck School of Business, Dartmouth College, 305 Tuck Hall, Hanover, NH 03755, United States;2. Terry College of Business, University of Georgia, Athens, GA 30605, United States;1. Fisher College of Business, The Ohio State University, 2100 Neil Avenue, Columbus, OH 43210, United States;2. Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6, Canada;3. Carlson School of Management, University of Minnesota, 321 19th Avenue S., Minneapolis, MN 55455, United States |
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| 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. |
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