The information value of interim accounting disclosures: evidence from mandatory monthly revenue reports

Using data from Taiwan, where listed firms are required to disclose monthly revenues, this paper examines the information value of mandatory interim revenue disclosures. We find that monthly revenue surprises have a significant effect on analysts’ earnings forecasts, suggesting that analysts incorporate such information into their earnings forecasts once the information is available. In addition, monthly revenue surprises significantly predict future earnings surprises, and their predictive power goes beyond the information provided by analysts’ earnings forecasts, suggesting that monthly revenue surprises provide leading information about future earnings growth but analysts do not fully reflect this information. Stock prices drift positively with monthly revenue surprises during the period prior to the quarterly earnings announcement. However, when quarterly earnings are finally announced, stock prices are no longer driven by monthly revenue surprises, suggesting that monthly revenue surprises have been fully incorporated into the stock prices. Overall, our results suggest that interim accounting information helps investors increase the speed of adjustments to fundamental news.