The Capital Market Implications of the Frequency of Interim Financial Reporting: An International Analysis

Abstract

This study examines empirically the extent to which the frequency of interim financial reporting affects stock price volatility over the course of the fiscal year in four countries with different interim reporting regimes: the United States and Canada with quarterly reporting, and Great Britain and Australia with semi-annual interim reporting. It is hypothesized that, in the tradeoff between timeliness and predictive value of the interim reports, semi-annual interim reporting will lead to lesser price volatility after accounting for other potential influences. These expectations are supported in the results found. Moreover, additional tests conducted on American ADRs of British and Australian companies show that those firms have higher volatility than comparable purely domestic firms in their home stock exchanges.