Financial statement filing lags: An empirical analysis among small firms

Abstract

This article examines financial statement filing lags among a sample of Belgian small firms. Our results indicate that around one-third of small firm financial statements are filed late (after the legal deadline), but that monetary sanctions could be an effective tool to encourage compliance with legal deadlines. Whereas the deadline and late filing sanctions are filing incentives, various factors, such as firm size and presence of an external financial statement audit, also affect financial statement filing lags. Evidence indicated that extremely late filings were associated with lower financial statement quality.

Business Failure and Entrepreneurship: Emergence, Evolution and Future Research

“…Secondly, small company accounts generally lack of a system of internal control, thus making independent confirmation of figures presented in the accounts problematic . Thirdly a time lag often occurs when small companies draw up their accounts [Luypaert et al, 2015], this delay further hinders the relevance of the information as a useful tool to determine the health of a firm . Ultimately, when it comes to business failure definitions many researchers are guided to the most appropriate failure definition based on the dataset available rather than vice versa, so a trade-off exists between ease of access to a dataset and an appropriate definition of business failure.…”

What Best Explains Reporting Delays? A SME Population Level Study of Different Factors

“…As public large-sized firms are under huge pressure to present financial statements to avoid reputational and market inefficiencies, the few studies about accounting information delays are mostly focused on SMEs. Luypaert et al [17] outlined why SMEs filed their financial statements late (more than seven months after the closing date of the accounting year) using a sample of Belgian private firms during 2006-2008. Specifically, Luypaert et al [17] showed that around 30% of Belgian SMEs filed late.…”

“…Luypaert et al [17] outlined why SMEs filed their financial statements late (more than seven months after the closing date of the accounting year) using a sample of Belgian private firms during 2006-2008. Specifically, Luypaert et al [17] showed that around 30% of Belgian SMEs filed late. Their conclusions are that external audit, size and age are determinants of late filing.…”

“…Their conclusions are that external audit, size and age are determinants of late filing. Additionally, extremely late filings were associated with lower financial statement quality and probable financial distress, calculated by using a local distress prediction model [17]. Clatworthy and Peel [18] also analyse the financial reporting timeliness of SMEs among a large sample of UK private firms, but this study is mainly focused on the effect of the regulatory context.…”

“…Information asymmetry problems have been found to be more severe for SMEs in comparison with large or listed firms [16]. The papers by Luypaert et al [17] on the example of Belgian SMEs and by Clatworthy and Peel [18] on the example of the UK's SMEs posit that, in case of delayed filings, the quality of financial statements is usually lower. However, there are also other explanations for the reporting delays of SMEs.…”