The Timeliness of UK Private Company Financial Reporting: Regulatory and Economic Influences

Abstract

This paper investigates the effects of both regulation and economic demand on the timeliness of UK private companies’ accounting information. We study companies’ response to a one-month shortening of the statutory filing deadline and hypothesise that companies using accounting to communicate financial information to outside capital providers will be timelier in filing their accounts and less affected by the regulatory change than firms preparing accounts for tax and compliance purposes. Our results indicate that companies producing accounting information for reporting to outside investors publish their accounts significantly more quickly than those filing for compliance/tax reasons, though the change in regulation significantly affects both types of companies. We find a reduction in the average filing time, though the proportion of firms filing late increases after the regulatory change. In addition to incurring financial and non-financial penalties, filing after the statutory limit has important economic consequences because our results show that firms filing late have significantly lower credit ratings. We conclude that both regulatory and fundamental factors are important in private company financial reporting and that the two are sometimes interdependent.

Keywords: Private companies, Financial reporting, Timeliness, Late filings, Credit ratings

JEL Classification: M40, M4