Procrastination and Earning Announcements
By Dr. Debby (Chih-Huei) Su—Procrastination is prevalent in human nature. Psychologists have conducted tons of surveys, experiments and research, looking for causes and cures for procrastination. Commonly mentioned causes of procrastination include, but are not limited to, the following:
Cures for Procrastination
Researchers and academic experts then turn their focus on proposing different methods for treating procrastination and aim to apply those treatments in diverse fields, such as academic performance, production efficiency, and etc. There are also a lot of applications/ gadgets invented to help people prevent potential procrastination. Among those curing applications, the most common, or the most effective, feature is to provide periodical monitoring. For example, teachers/ professors assign periodical homework and examinations to check the students’ progress in learning the subjects. Employers may request weekly/ monthly/ or even annual report and set the deadlines for the goals to monitor the performance and to reduce potential procrastination.
Applications in Corporate Practices
The same logic may apply in corporate practices, especially the timing of earnings announcements. U.S. Securities and Exchange Commission (SEC) mandates that public companies provide periodic reports, such as quarterly reports and annual reports. In general, public companies can choose the timing to release their earnings disclosures among a specified period of time, i.e. 40 to 45 days following the end of fiscal quarter and 60 to 90 days following the end of the fiscal year.
Since managers of public companies are granted some flexibility in determining the timing of releasing earnings profiles, I, therefore, am very interested in whether managers have shown procrastination in making earnings announcements and whether the monitoring mechanism works in preventing such managerial procrastination.
Interestingly, early studies already documented a prevailing phenomenon that managers tend to announce good earnings early, but bad news late, which is consistent with my conjectured managerial procrastination. A lot of researchers proposed different reasons to explain for this managerial procrastination phenomenon. For example, Trueman (1990)[3] found that managers may delay earnings announcements to get more time to reverse the bad performance through a change in accounting standards or arrangements, or so-called earnings management. Matsumoto (2002)[4] also provided empirical evidence to show that managers may put off the timing of earnings announcements to manipulate analyst forecast consensus to avoid negative earnings surprises.
Future Research
Understanding potential reasons of managerial procrastination, I’d like to test whether this phenomenon still remains in the current decade after several accounting and financial reforms and to see whether the bank monitoring would serve as a good monitoring mechanism that could help prevent managerial procrastination.
Assistant Professor of Finance-Cameron School of Business, University of St. Thomas
[1] Steel, The nature of procrastination: a meta-analytic and theoretical review of quintessential self-regulatory failure, Psychological Bulletin, 2007
[2] Tice and Baumeister, Longitudinal study of procrastination, performance, stress, and health: The costs and benefits of dawdling, Psychological Science, 1997
[3] Trueman, Theories of earnings-announcement timing, Journal of Accounting and Economics, 1990, Vol 13, Issue 3, Page 285-301
[4] Matsumoto, Management’s incentives to avoid negative earnings surprises, The Accounting Review, 2002, Vol 77, Issue 3, Page 483- 514