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http://hdl.handle.net/2451/27570
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| Title: | Information Acquisition Decisions and the Choice of Financial Year-Ends |
| Authors: | Fried, Dov
Sinha, Nishi |
| Issue Date: | Oct-1998 |
| Series/Report no.: | Haim Dov Fried-01 |
| Abstract: | In some industries the financial-year-ends of member firms are clustered
together whereas in others they are more widely dispersed. This study
attempts to provide an explanation for this phenomenon. Recognizing that
financial-year-ends are not just the time when firms disclose
information but also the time when they acquire information (when books
are closed), we frame this study in the larger economic context of
determining the optimal timing of information acquisition and release.
Prior studies have examined the frequency with which firms acquire
costly information. We address a question that follows naturally: given
that information is acquired only once every t operating periods, when
during the t period should such an exercise take place? We also examine
a related question: do competing firms have any incentive to share the
information acquisition burden? The results of our analysis indicate
that firms’ choice of their financial year-end may partially be
driven by the degree of correlation between the firms’ cost (and
demand) parameters and the incentives to share the information
acquisition burden. Duopolists that face random but permanent shocks to
their linear cost (or demand) parameter every period, but who can
collect information in only some of the periods, will choose identical
yearends (that which is dictated by the stochastic environment) unless
their costs are very strongly correlated (almost close to 1). Only when
their costs are highly correlated do the firms choose staggered
year-ends. Whether year ends are clustered or staggered are also shown
to be a function of the differences in cost variances for the two firms. |
| URI: | http://hdl.handle.net/2451/27570 |
| Appears in Collections: | Accounting Working Papers
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