Bankruptcy risk, its financial determinants and reporting delays : do managers have anything to hide?

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.