LATE FILINGS OF ANNUAL REPORTS AND THE STOCK MARKET REACTION

Abstract

Recently, the market has been keeping an eye out for late filers of Form 10-Ks and 20-Fs in the United States (US). Prior research has shown that such firms experience negative stock returns upon announcing their intention to file late. The announcement is publicised through the electronic submission of Form 12b-25, a compulsory notification of late filing to the US Securities and Exchange Commission (SEC). As prior studies are predominantly focused on Form 10-K late filers which are mostly domestic firms, my study will be the first to examine if the same could be said for foreign firms. I hypothesise that foreign firms will experience more negative stock returns than domestic firms due to higher barriers to enforcement for firms in foreign jurisdictions. My results showed some evidence that foreign firms have more negative stock returns compared to domestic firms when they submit their Form 12b-25, especially when audit-related issues are cited as the reason behind late filing. Thus, there is scope for additional research on the relative degree of enforcement on domestic 10-K filing firms, foreign 10-K filing firms and foreign 20-F filing firms since the proportion of US investors differs and the costs of enforcement varies between jurisdictions.