Research On The Predictive Ability Of Financial Distress By Annual Report Disclosure Delay

According to the Financial Safety Assessment Report of Chinese Non-financial Listed Companies issued by the Institute of Information Research of the Ministry of Commerce,the total financial safety index(FSI)of Chinese non-financial listed companies has been declining since 2012,and the total financial safety situation of China's non-financial listed companies in 2017 is the worst in the past 10 years.Faced with the increasing financial risks of listed companies in China in recent years,the importance of enterprises' financial distress prediction research has become increasingly prominent.External investors have no access to the first-hand information of the business status of the enterprise,they make decisions based on the information disclosed by the enterprise,the various actions of the management,and signals given by the relevant institutions.As the main form of company information disclosure,the quality of information disclosure will inevitably affect the decision-making behavior of external stakeholders.Timeliness,as an important aspect of information quality,is highly valued by the regulatory authorities.Statistics show that ~* ST Zhongan,~* ST Sanwei,~* ST Santai and other companies that have been warned of delisting risk have joined the ranks of delayed disclosure annual reports.There are complex and profound reasons behind the seemingly simple behavior of the delay of annual report disclosure.So,does the delay of annual report disclosure help to judge the financial distress of enterprises?Based on the above,this paper takes all non-financial A-share listed companies from 2011 to 2017 as samples to examine the enterprises' financial distress predictive ability of annual report disclosure delay.Specifically,this paper examines the following propositions: First,can the report disclosure delay information improve the predictive ability of enterprises' financial distress? Secondly,this paper examines the cross-sectional impact of report disclosure delay information on enterprises' financial distress predictive ability by other factors.Based on earnings quality,analyst's coverage and ownership concentration,this paper conducts grouping regression to test the impact of earnings quality,analyst's coverage and ownership concentration on enterprises' financial distress predictive ability of report disclosure delay information.Thirdly,this paper further explores the extreme behavior of the report disclosure delay-the ability to predict financial distress before the deadline.The study found that:(1)There is a significant positive correlation between the delay of annual report disclosure and the occurrence of enterprises' financial distress in the future.After adding this index into the benchmark prediction model,the enterprises' financial distress predictive ability of the model has been significantly improved.After changing the measurement method of the delay of annual report disclosure,using principal component analysis(PCA)to change the benchmark predictive model,and changing the discriminant method of predictive accuracy,the results are still valid.(2)Cross-sectional analysis found that the annual report disclosure delay information plays a more significant role in improving financial distress predictive ability of enterprises with lower earnings quality,less analysts' coverage and lower ownership concentration.(3)Further analysis found that the extreme case of the delay of annual report disclosure,i.e.the annual report disclosure in one week before the deadline and the annual report disclosure in ten days before the deadline,also has an incremental contribution to the prediction of enterprises' financial distress in the future,and its predictive ability is greater than that of the enterprises' financial distress predictive ability of the report disclosure delay information.The conclusion of this paper is helpful to understand the connotation of the disclosure delay of annual reports,help information users accurately predict the financial situation,and make more reasonable decisions in time.