$ZMRK:__MISSING A FILING DEADLINE CAN HAVE DIRE CONSEQUENCES__read-below:
If the deadline is missed, however, consequences may include loss of SEC registration, de-listing from stock exchanges as well as possible legal consequences. And there are other consequences to non-timely filings as well, that an investor or other stakeholder might want to take note of.
Recent research supports the idea that NT 10-Qs have a negative effect on share value, as one might expect. A paper by Bartov, Defond and Konchitchki, for example, presented evidence that late filings are correlated with negative market reactions. Interestingly, the negative share price reaction tended to be more dramatic for NT 10-Q filings, particularly when the reason for the delay was related to accounting issues.
One reason that late quarterly reports may be more significant is that they contain less information than a 10-K and aren’t audited, and therefore should be easier to file. The relative simplicity of the filing leads to questions about the reporting company if they are not able to meet these fairly minimal requirements. Are the company’s controls effective? Are there accounting issues? Are the personnel inadequate? These are just some of the questions an investor might have.
To summarize, common sense suggests that any NT is bad news for the company, and a red flag for investors and regulators alike. A little digging into the data suggests that NT filings that are either filed outside of the 40-41 days window or are not followed with a prompt completion of financial reports raises more significant red flags.
Credit for the above goes to Audit Analytics 2017.
