The U.S Securities & Exchange Commission (“SEC”) requires companies to submit quarterly (10-Q) and annual (10-K) financial statements in a timely manner. Companies that cannot file within the statutory period are required to file form 12b-25 with the SEC.
In this report we examine the relationship between late filings (form 12b-25s) and subsequent market returns, as well as whether late filings signal deeper fundamental problems within the company.
Our results, within the Russell 3000 universe (February 1994 – June 2015), indicate that abnormal returns of late filers is negative prior to and post form 12b-25 filing. Late filers are also typically companies with poor fundamental characteristics relative to peers; investors may want to consider avoiding or short-selling these firms.
This report is a continuation of our work in the area of event driven investing, a class of strategies that originate from company specific events.
Late to File: The Costs of Delayed 10-Q and 10-K Company Filings
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