Plastic2Oil Inc (PTOI)

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The Consequences of a Late Filing

by Vanessa on March 4, 2011
http://100fstreet.com/index.php/2011/03/the-consequences-of-a-late-filing/

Nobody likes a late filer, especially not if the filing is a quarterly report and the reason its late is because of an accounting issue.

A recent academic study, out of the University of Southern California and New York University, examines the Capital Market Consequences of Filing Late 10-Qs and 10-Ks and finds, as you might have guessed, that capital markets react negatively when a company files a late quarterly or annual report. In addition, and perhaps less intuitively, the study finds that capital markets react more negatively in response to the filing of late quarterly reports than to the filing of late annual reports, and even more so when accounting issues are cited as the reason for the delay. The authors postulate that this is because quarterly reports require less disclosure and are unaudited, and so markets perceive accounting issues associated with the filing of late quarterly reports as more significant than accounting issues associated with the filing of late annual reports.

The study uses change in share price to measure market reaction and observes late filers for a period of eight months following their notice of late filing. In the short term, companies experience an immediate negative reaction when they announce a late filing and a significantly more negative reaction if they miss the Securities Exchange Act Rule 12b-25 filing grace period. Interestingly, companies continue to experience share price declines for several months following a late filing, except when accounting issues are the reason for the delay, because, the authors suggest, investors are better able to interpret and immediately react to accounting-related information.

Beyond the capital market consequences of a late filing, there are a host of other issues to consider:

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http://100fstreet.com/index.php/2011/03/the-consequences-of-a-late-filing/