Frequent Reporting and Short-Termism: An Experimental Investigation

Financial market regulators have long debated the appropriate frequency of mandatory corporate financial disclosures. Whereas frequent disclosures may help deter overinvestment, they may also encourage short-termism. This paper reports an experiment that examines the effects of varying reporting frequencies on managerial investment decisions. Experimental results indicate that frequent reporting modestly induces short-termism, but it fails to reduce the overinvestment observed in the infrequent reporting regime. Nonbinding communication of intended investment plans does reduce overinvestment, but only in the infrequent reporting regime. This paper was accepted by Ranjani Krishnan, accounting. Funding: This work was supported by the National Science Foundation [Grant SES 1949112]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01955 .