Delays in reporting price-sensitive information: The case of going concern

Regulators require firms to disclose all price-sensitive information at the earliest possible date. The going-concern opinion constitutes a fundamental uncertainty for the firm and thus is likely to be of a price-sensitive nature. This paper explores whether going-concern uncertainty disclosures are price sensitive in the London market, and then tests whether managements report such audit report information to investors on a timely basis. We capitalize on a London Stock Exchange regulatory loophole which, in effect, allows financially-distressed firms to choose either to report a forthcoming going-concern at the preliminary results announcement stage, or to delay this crucial information to their annual report release. In line with the regulatory requirements, we expect that firms with more price-sensitive, i.e., more serious, adverse news will disclose their forthcoming going-concern opinion at the earliest stage i.e., in their preliminary announcement, rather than delay to their annual report.