SEC Filings, Regulatory Deadlines, and Capital Market Consequences

Abstract

Timely disclosure of financial statement information is a critical requirement for firms and well-functioning capital markets. Yet, every quarter or year, a non-trivial number of firms are late in filing their financial statements. This paper identifies and probes various capital market consequences for late filings of quarterly and annual financial statements. It examines the short- and long-window reaction to late filings, as well as how equity investors process statements accompanying late filing announcements, such as managers declaring intentions to file within/outside SEC’s allowed grace periods. The paper documents that delayed quarterly filings have distinctly different valuation implications than delayed annual filings over the short and long run, and that accounting problems play a unique role in signaling the seriousness of the delay. It also shows that investors do not accept managements’ delay-related assertions at face value, and that delayed filing announcements signal continued poor performance that is not fully reflected in stock prices at the time the announcements are made. One particularly surprising finding is that stock prices drop significantly as soon as firms signal late statement filings via the regulatory form, even when management declares it will meet the extended deadline. Overall, this paper sheds new light on important capital market consequences of filing financial statements late.

Keywords: Asset Pricing, Accounting Problems, SEC Filings, Financial Statements, Market Efficiency

JEL Classification: G12, G14, M41