The Frequency of Voluntary Disclosures and the Information Discovery Role of Analysts: A Study of Monthly Comparable Store Sales Disclosures

ABSTRACT In this study, we examine whether more frequent voluntary disclosures are associated with greater pre‐disclosure forecasting activity by analysts in the retail industry. We observe a positive association between the disclosure of monthly comparable store sales (MCSS) and the number of analysts’ quarterly sales forecasts preceding managers’ public MCSS disclosure. Moreover, we find that an increase in analysts’ pre‐disclosure forecasts correlates with heightened abnormal investor activity, including stock return volatility and trading volume, preceding the public announcement of MCSS. In addition, the magnitude of market reactions to pre‐disclosure forecasts is similar to that of reactions to post‐disclosure forecasts. The evidence suggests that when retail firms provide more frequent and timely comparable store sales (CSS) information, analysts demonstrate greater interest and research activity in providing pre‐disclosure quarterly sales forecasts. CSS is a voluntary disclosure of a key performance indicator (KPI), and the findings may be important to regulators who are considering the importance and frequency of future KPI reporting.