Evidence of a Recent Increase in the Usefulness of Quarterly Earnings Announcements

Abstract

I document a recent increase in the usefulness of quarterly earnings announcements. I measure the usefulness of earnings announcements as the percentage of total annual excess returns that occurs on or around quarterly earnings announcements. In the main sample, approximately 18.4% of uncertainty is resolved by quarterly earnings announcements from 2002-2005 compared to 14.5% from 1976-2001, an increase of 27%. I include firm-specific controls for variations in an individual firm's underlying characteristics, information environment, voluntary disclosure, and a proxy for the amount of other information in earnings announcements. I create a quarterly variation of my annual measure, allowing me to track changes in usefulness on a month-by-month basis. Informal analysis suggests that the increase in usefulness begins in June 2002, the first month for which the filing date of the 10-Ks and 10-Qs associated with the earnings announcements is after the implementation of, and therefore subject to, SOX.