City Research Online

Abstract

We examine how mandatory financial reporting frequency affects corporate investment decisions using hand-collected data on U.S. public firms that experienced reporting frequency increases between 1950 and 1974. Employing a generalized difference-in-differences design, we find that investment-to-stock-price sensitivity (IPS) increases following increases in reporting frequency. Our results suggest that more frequent reporting enhances the informational role of stock prices and enables managers to make better-informed investment decisions. Consistent with this mechanism, we document a post-adoption increase in profitability. The increase in IPS is strongest for firms with greater private information-based trading and for growth-oriented firms that rely more on external market signals. We find no evidence that the increase in IPS is driven by reduced financial constraints or a lower cost of capital. To assess external validity, we analyze the European Union’s 2007 Transparency Directive, which required interim management statements (IMS) between semi-annual reports. We find a similar IPS increase for affected firms. Overall, our findings demonstrate that reporting frequency influences the quality of corporate investment decisions and inform ongoing regulatory debates about financial reporting frequency. In addition, our results underscore the need for regulators to consider how the type of information they require firms to disclose shapes investors’ private information search activities and, in turn, influences managerial learning and real investment efficiency.

Publication Type:	Article
Additional Information:	© 2026. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords:	financial reporting frequency; investment-to-price sensitivity (IPS); market feedback; stock price informativeness
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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