IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v7y2019i3p77-d246370.html
   My bibliography  Save this article

Bankruptcy Risk, Its Financial Determinants and Reporting Delays: Do Managers Have Anything to Hide?

Author

Listed:
  • Oliver Lukason

    (Faculty of Economics and Business Administration, University of Tartu, Tartu 50409, Estonia)

  • María-del-Mar Camacho-Miñano

    (Accounting and Finance Department, Complutense University of Madrid, Madrid 28223, Spain)

Abstract

The aim of this study was to investigate whether firms’ reporting delays are interconnected with bankruptcy risk and its financial determinants. This study was based on 698,189 firm-year observations from Estonia. Annual report submission delay, either in a binary or ordinal form, was used as the dependent variable, while bankruptcy risk based on an international model or the financial ratios determining it were the independent variables. The findings indicated that firms with lower values of liquidity and annual and accumulated profitability were more likely to delay the submission of an annual report over the legal deadline. In turn, firm leverage was not interconnected with reporting delays. In addition, firms with a higher risk of bankruptcy were more likely to delay the submission of their annual reports. Firms with different ages, sizes and industries varied in respect to the obtained results. Different stakeholders should be aware that when reporting delays occur, these can be conditioned by higher bankruptcy risk or poor performance, and thus, for instance, crediting such firms should be treated with caution. State institutions controlling timely submission should take strict(er) measures in cases of firms delaying for a lengthy period.

Suggested Citation

  • Oliver Lukason & María-del-Mar Camacho-Miñano, 2019. "Bankruptcy Risk, Its Financial Determinants and Reporting Delays: Do Managers Have Anything to Hide?," Risks, MDPI, Open Access Journal, vol. 7(3), pages 1-15, July.
  • Handle: RePEc:gam:jrisks:v:7:y:2019:i:3:p:77-:d:246370
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/7/3/77/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2227-9091/7/3/77/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Skinner, Dj, 1994. "Why Firms Voluntarily Disclose Bad-News," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 38-60.
    2. Smith, Clifford Jr. & Watts, Ross L., 1992. "The investment opportunity set and corporate financing, dividend, and compensation policies," Journal of Financial Economics, Elsevier, vol. 32(3), pages 263-292, December.
    3. Stephen Owusu-Ansah, 2000. "Timeliness of corporate financial reporting in emerging capital markets: empirical evidence from the Zimbabwe Stock Exchange," Accounting and Business Research, Taylor & Francis Journals, vol. 30(3), pages 241-254.
    4. Lukason, Oliver & Laitinen, Erkki K., 2019. "Firm failure processes and components of failure risk: An analysis of European bankrupt firms," Journal of Business Research, Elsevier, vol. 98(C), pages 380-390.
    5. Scott, James, 1981. "The probability of bankruptcy: A comparison of empirical predictions and theoretical models," Journal of Banking & Finance, Elsevier, vol. 5(3), pages 317-344, September.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Mark Clatworthy & Michael Peel, 2016. "The Timeliness of UK Private Company Financial Reporting: Regulatory and Economic Influences," Bristol Accounting and Finance Discussion Papers 16/3, School of Accounting and Finance, University of Bristol, UK.
    8. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November.
    9. Peel, MJ & Peel, DA & Pope, PF, 1986. "Predicting corporate failure-- Some results for the UK corporate sector," Omega, Elsevier, vol. 14(1), pages 5-12.
    10. Lawrence, Ec, 1983. "Reporting Delays For Failed Firms," Journal of Accounting Research, Wiley Blackwell, vol. 21(2), pages 606-610.
    11. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    12. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    13. Ohlson, Ja, 1980. "Financial Ratios And The Probabilistic Prediction Of Bankruptcy," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 109-131.
    14. Skinner, Douglas J., 1997. "Earnings disclosures and stockholder lawsuits," Journal of Accounting and Economics, Elsevier, vol. 23(3), pages 249-282, November.
    15. Doris M. Merkl-Davies & Niamh Brennan, 2007. "Discretionary disclosure strategies in corporate narratives : incremental information or impression management?," Open Access publications 10197/2907, Research Repository, University College Dublin.
    16. du Jardin, Philippe, 2015. "Bankruptcy prediction using terminal failure processes," European Journal of Operational Research, Elsevier, vol. 242(1), pages 286-303.
    17. Begoña Giner Inchausti, 1997. "The influence of company characteristics and accounting regulation on information disclosed by Spanish firms," European Accounting Review, Taylor & Francis Journals, vol. 6(1), pages 45-68, May.
    18. Peel, M. J. & Peel, D. A., 1988. "A multilogit approach to predicting corporate failure--Some evidence for the UK corporate sector," Omega, Elsevier, vol. 16(4), pages 309-318.
    19. Darrough, Masako N. & Stoughton, Neal M., 1990. "Financial disclosure policy in an entry game," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 219-243, January.
    20. Elliott, Ja, 1982. "Subject To Audit Opinions And Abnormal Security Returns - Outcomes And Ambiguities," Journal of Accounting Research, Wiley Blackwell, vol. 20(2), pages 617-638.
    21. Dyer, Jc & Mchugh, Aj, 1975. "Timeliness Of Australian Annual-Report," Journal of Accounting Research, Wiley Blackwell, vol. 13(2), pages 204-219.
    22. Mark Clatworthy & Michael Jones, 2003. "Financial reporting of good news and bad news: evidence from accounting narratives," Accounting and Business Research, Taylor & Francis Journals, vol. 33(3), pages 171-185.
    23. Soltani, Bahram, 2002. "Timeliness of corporate and audit reports: Some empirical evidence in the French context," The International Journal of Accounting, Elsevier, vol. 37(2), pages 215-246.
    24. Pindado, Julio & Rodrigues, Luis & de la Torre, Chabela, 2008. "Estimating financial distress likelihood," Journal of Business Research, Elsevier, vol. 61(9), pages 995-1003, September.
    25. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    26. Skinner, Douglas J., 1993. "The investment opportunity set and accounting procedure choice : Preliminary evidence," Journal of Accounting and Economics, Elsevier, vol. 16(4), pages 407-445, October.
    27. Clatworthy, Mark A. & Peel, Michael J., 2016. "The timeliness of UK private company financial reporting: Regulatory and economic influences," The British Accounting Review, Elsevier, vol. 48(3), pages 297-315.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oliver Lukason & María-del-Mar Camacho-Miñano, 2021. "What Best Explains Reporting Delays? A SME Population Level Study of Different Factors," Sustainability, MDPI, Open Access Journal, vol. 13(9), pages 1-15, April.
    2. Thomas Selleslagh & Stefanie Ceustermans & Lara Stas, 2021. "Not All Late Filers Are the Same: Distinguishing between Differences in Filing Behaviour," Sustainability, MDPI, Open Access Journal, vol. 13(19), pages 1-21, September.
    3. Õie Renata Siimon & Oliver Lukason, 2021. "A Decision Support System for Corporate Tax Arrears Prediction," Sustainability, MDPI, Open Access Journal, vol. 13(15), pages 1-23, July.
    4. Elsayed, Mohamed & Elshandidy, Tamer, 2020. "Do narrative-related disclosures predict corporate failure? Evidence from UK non-financial publicly quoted firms," International Review of Financial Analysis, Elsevier, vol. 71(C).
    5. Oliver Lukason & Germo Valgenberg, 2021. "Failure Prediction in the Condition of Information Asymmetry: Tax Arrears as a Substitute When Financial Ratios Are Outdated," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 14(10), pages 1-13, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliver Lukason & Art Andresson, 2019. "Tax Arrears Versus Financial Ratios in Bankruptcy Prediction," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(4), pages 1-13, December.
    2. Elsayed, Mohamed & Elshandidy, Tamer, 2020. "Do narrative-related disclosures predict corporate failure? Evidence from UK non-financial publicly quoted firms," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Oliver Lukason & María-del-Mar Camacho-Miñano, 2021. "What Best Explains Reporting Delays? A SME Population Level Study of Different Factors," Sustainability, MDPI, Open Access Journal, vol. 13(9), pages 1-15, April.
    4. Thomas Selleslagh & Stefanie Ceustermans & Lara Stas, 2021. "Not All Late Filers Are the Same: Distinguishing between Differences in Filing Behaviour," Sustainability, MDPI, Open Access Journal, vol. 13(19), pages 1-21, September.
    5. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    6. García-Gallego, Ana & Mures-Quintana, María-Jesús, 2013. "La muestra de empresas en los modelos de predicción del fracaso: influencia en los resultados de clasificación || The Sample of Firms in Business Failure Prediction Models: Influence on Classification," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 15(1), pages 133-150, June.
    7. Encarna Guillamón-Saorín & Carlos M. P. Sousa, 2014. "Voluntary Disclosure of Press Releases and the Importance of Timing: A Comparative Study of the UK and Spain," Management International Review, Springer, vol. 54(1), pages 71-106, February.
    8. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    9. Fargher, Neil & Wee, Marvin, 2019. "The impact of Ball and Brown (1968) on generations of research," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 55-72.
    10. Ciampi, Francesco, 2015. "Corporate governance characteristics and default prediction modeling for small enterprises. An empirical analysis of Italian firms," Journal of Business Research, Elsevier, vol. 68(5), pages 1012-1025.
    11. Dayanandan, Ajit & Donker, Han & Karahan, Gökhan, 2017. "Do voluntary disclosures of bad news improve liquidity?," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 16-29.
    12. Devalle, Alain & Rizzato, Fabio & Busso, Donatella, 2016. "Disclosure indexes and compliance with mandatory disclosure—The case of intangible assets in the Italian market," Advances in accounting, Elsevier, vol. 35(C), pages 8-25.
    13. Francesco Ciampi & Valentina Cillo & Fabio Fiano, 2020. "Combining Kohonen maps and prior payment behavior for small enterprise default prediction," Small Business Economics, Springer, vol. 54(4), pages 1007-1039, April.
    14. Michael Bradbury & Graeme Dean & Frank L. Clarke, 2009. "Incentives for Non‐Disclosure by Corporate Groups," Abacus, Accounting Foundation, University of Sydney, vol. 45(4), pages 429-454, December.
    15. Mahmud Hossain & Kamran Ahmed & Jayne M. Godfrey, 2005. "Investment Opportunity Set and Voluntary Disclosure of Prospective Information: A Simultaneous Equations Approach," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 871-907, June.
    16. Kim, Irene & Skinner, Douglas J., 2012. "Measuring securities litigation risk," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 290-310.
    17. Pablo de Llano Monelos & Manuel Rodríguez López & Carlos Piñeiro Sánchez, 2013. "Bankruptcy Prediction Models in Galician companies. Application of Parametric Methodologies and Artificial Intelligence," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 117-136.
    18. Lopes, Patricia Teixeira & Rodrigues, Lucia Lima, 2007. "Accounting for financial instruments: An analysis of the determinants of disclosure in the Portuguese stock exchange," The International Journal of Accounting, Elsevier, vol. 42(1), pages 25-56.
    19. E. Cheynel & M. Liu-Watts, 2020. "A simple structural estimator of disclosure costs," Review of Accounting Studies, Springer, vol. 25(1), pages 201-245, March.
    20. Field, Laura & Lowry, Michelle & Shu, Susan, 2005. "Does disclosure deter or trigger litigation?," Journal of Accounting and Economics, Elsevier, vol. 39(3), pages 487-507, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:7:y:2019:i:3:p:77-:d:246370. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://www.mdpi.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: XML Conversion Team (email available below). General contact details of provider: https://www.mdpi.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.