Why do firms change fiscal year-end?

Changing fiscal year-end (FYE) unequivocally impacts time-series consistency, yet firms appear to be willing to change it.Enhanced comparability with industry peers appears to be a significant driver of this change.Changing FYE to align with industry peers is associated with a significant increase in analyst coverage, the number of forecasts per analyst, and institutional ownership.Investors earn 0.28% higher return surrounding the public disclosure of such changes.Additionally, loss-making firms also appear more likely to change FYEs, ostensibly to dump losses in the less-than-12-month stub period created by the transition.Examining changes to and from December separately, I find that small firms are more likely to move to a non-December FYE, suggesting that accounting costs such as audit fees, employee overtime payment, and staff retention are a consideration in changing FYE.Keywords: fiscal year-end, comparability, consistency, accounting choice numerous situations.For example, FASB (1980, p.40) states that "investing and lending decisions essentially involve evaluations of alternative opportunities, and they cannot be made rationally if the comparative information is not available."Such demand for an improved information environment induced by comparability can motivate firms to align with their peers by switching to the FYE adopted by the majority of firms in their industry.Management provides investors with consistent measures of the firm's business, making year over year comparisons more straightforward by maintaining the same FYE.Changing the FYE, however, reduces the time-series consistency that firms have established over the years.Without time-series consistency, investors, analysts and other stakeholders could have difficulty reconciling and comparing year-over-year results, making it harder to assess the firm's performance.Changing FYE can also be expensive.When firms decide to change FYEs, their internal accountants must prepare financial information based on both the new FYE and the old FYE.Management must file an 8-K form with the Securities and Exchange Commission to disclose this change in fiscal year-end (17 CFR Parts 228, 229) once the change is approved by the board of directors.Firms are obligated to file a return for the short tax period ("stub period") that results from the change with the Internal Revenue Service (Organizations Annual Reporting Requirements).Besides, firms are required to file a report covering the transition period (Exchange Act Rule 13a-10, 15d-13 & FRC 102.05).For example, On February 25, 2016, Synergy Resources Corporation changed their fiscal year from the period beginning on September 1 and ending on August 31 to the period beginning on January 1 and ending on December 31.As a result, the report on 10-K filed on April 22, 2016 is a transition report and includes financial information for the stub period from September 1, 2015 through December 31, 2015 (Synergy Resources Corporation, 2016).Stakeholders need to be informed, and their concerns and questions regarding the change