Dissemination of Accruals Information, Role of Semi-Annual Reporting, and Analysts' Earnings Forecasts: Evidence from Japan

Our study investigates the effects of dissemination of accounting accruals information on stock prices using Japanese annual reports as our sample. We conduct month-by-month detailed analyses of price adjustment behavior with a particular focus on revisions of analysts' earnings forecasts and changes in trading volume around the period of upcoming semi-annual reports. We find that analysts' forecasts are often revised around this time, and analysts use this as auxiliary information. In addition, an accompanying re-adjustment of abnormal returns and an increase in trading volume are observed. Our findings demonstrate that informational uncertainty initially triggered by the announcement of annual reports decreases as semi-annual reports are disclosed and analysts change their earnings forecasts, and confirms the importance of semi-annual reporting.