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Research Highlights

Late SEC Filings Make Investors Leery

By Eli Bartov, Research Professor of Accounting

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The market reacts negatively when firms announce they will file late forms, especially 10-Qs that are being held up for accounting reasons.

Investors punish companies that don’t file their 10-Q or 10-K forms on time, according to research by NYU Stern Accounting Professor Eli Bartov and co-authors.

The market reacts negatively when firms announce they will file late forms, especially 10-Qs that are being held up for accounting reasons. The perception among investors is that the accounting problems must be severe if they’re delaying 10-Q filing, because the 10-Q requires less disclosure than the 10-K and is unaudited.

Companies get no automatic slack from investors even if they state the 10-Q or 10-K filing delay will be very short, i.e., within the SEC grace period. In his paper, “Capital Market Consequences of Filing Late 10-Qs and 10-Ks,” Bartov writes, “The market anticipates which late filers will subsequently fail to file within the SEC’s allowed grace period.”

The research also showed that the stock prices of late filers generally continue to decline during the months following a late filing announcement.