Causal Effects of Quarterly Reporting An Analysis of Benefits and Costs

Abstract

We exploit a regulatory change in Singapore to analyze the capital market effects of mandatory quarterly reporting on small firms. The listing rule implemented in 2003 has required firms with a market capitalization above S$75 million — but not firms with a market capitalization below this threshold — to publish quarterly financial statements. Using regression discontinuity analysis for our identification, we provide novel evidence on the causal effects of mandatory quarterly reporting. We find a decrease in firm value consistent with the notion that mandatory quarterly reporting imposes a net burden on small firms. Contrary to general belief, and in line with our main finding, we observe no improvements in liquidity. Our results also show that quarterly reporting does not complement or substitute for existing corporate governance mechanisms to improve liquidity.