Research Project on the Design for the Optimum Disclosure System Volume 5: An evaluation and future direction of quarterly disclosures in Japan

Author Name KAGAYA Tetsuyuki  (Hitotsubashi University) /NAKANO Takayuki  (Hosei University) /MATSUMOTO Yoshinao  (Kansai University) /MACHIDA Yoshihiro  (Aoyama Gakuin University)
Creation Date/NO. March 2011 11-J-017
Research Project Research Project on the Design for the Optimum Disclosure System
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The objective of this research is to examine the benefits and costs of quarterly disclosures and to accumulate empirical evidence for improving them. In particular, this research focuses on the information usefulness of quarterly disclosures, earnings management in the quarterly financial results, and the consciousness or activity of the related stakeholders (corporate managers, auditors, and analysts) to the quarterly disclosures.

The results are as follows: First, quarterly earnings announcements are value-relevant based on our examination of stock price variability around quarterly earnings announcements as compared to variability observed in other periods. Second, quarterly disclosures can reveal the earnings management by information preparers, and the quarterly reports or reviews that are in accordance with the Financial Instruments and Exchange Act (required since 2008) are less influenced by management or the information preparers. Third, the survey to the people in charge of finance and accounting shows that the workload of disclosing quarterly financial reports according to the Financial Instruments and Exchange Act is excessive. Costs of disclosing the quarterly statements in accordance with the adoption of IFRS could increase since the new accounting procedures can increase. We need to examine the benefits of quarterly disclosure from a wide variety of perspectives, share the evidence in terms of benefits and costs with related stakeholders, and organize their roles in the disclosure systems, such as regulated disclosures according to laws, the stock exchanges, and investor relations.