An analysis of the timeliness and nature of profit warnings in the aftermath of the Global Financial Crisis

Pugliese, Amedeo, O'Reilly, Erin, & Gallery, Gerry T. (2012) An analysis of the timeliness and nature of profit warnings in the aftermath of the Global Financial Crisis. In Accounting & Finance Association of Australia New Zealand Conference (AFAANZ 2012), 1-3 July 2012, Melbourne, VIC.

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Abstract

The global financial crisis (GFC) has severely impacted the financial position and performance of many companies internationally. Because of its severity and associated increase in uncertainty it challenges the effectiveness of existing disclosure regulation. Australia provides a unique environment in which to test the effects of the GFC on corporate disclosure because statutory rules mandate the timely disclosure of ‘price-sensitive’ information (ASX Rule 3.1) by listed entities. Exploiting this institutional setting we investigate the determinants and timeliness of profit warnings issued by the top 500 ASX-listed firms with profit declines in the 2009 fiscal year. Our findings show that firms behave differently with regard to the issuance of profit warnings: larger and more indebted firms are more likely to issue a profit warning and tend to be timelier; surprisingly, poorer performing firms tend to release the news more quickly and this might be attributed to an increasing threat of litigation. Our analysis of profit warning determinants shows interesting results with the presence of asset impairments hindering the early disclosure of profit warnings. Our findings are novel for two main reasons: first, we provide insights into the impact of global financial crisis on profit warning behaviour; second, we are the first to examine the differential impact of alternative features of profit warnings on disclosure timeliness. The findings have implications for regulators in determining compliance with continuous disclosure rules and more broadly, for market participants in interpreting profit warnings.

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ID Code: 78021
Item Type: Conference Paper
Refereed: Yes
Keywords: Profit Warnings, Continuous Disclosure, GFC
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Copyright Owner: Copyright 2012 The Author(s)
Deposited On: 23 Oct 2014 22:23
Last Modified: 10 Dec 2014 21:30

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