The date and time that a company releases its earnings is important because investors looking to buy or sell the particular security are counting on the information to help make a decision. When the earnings are released, the price of the security is almost always affected if it differs from the expected amount; this is often known as a surprise.
When an earnings deadline is missed, serious problems can occur in the stock market, as investors begin to worry about what might have caused the company to miss the deadline. Even if the reason is completely innocent, the notion that something must be wrong will always be in the back of investors' minds. Missing deadlines will almost always have a negative effect on the price of the stock, and volatility will surely increase.
However, stock exchanges have rules in place to protect investors from this volatility. For example, Nasdaq stock market rules say that missing a deadline could result in the market immediately suspending trading and delisting the company's common stock. This rarely happens, as companies are usually able to request an extension to get the financial statements released prior to being delisted.
Missed Deadlines and Grace Periods
There are other consequences imposed by the Exchange Act. Rule 12(b)-25, for example, says that if a company doesn't file a quarterly report within one business day of the due date, it must file an official notification of late filing explaining the reason why. There is a grace period of five calendar days for quarterly reports and 15 days for annual reports. If the company files within the grace period, it may be considered filed in a timely manner by the exchange, and this is important, because it affects the company's filing status for a period of at least 12 months. The company will not be allowed to file a short-form S-3 registration, which in turn limits its ability to make certain securities offerings.
If the company you own shares in has just missed its earnings deadline, it may not be reason to panic and dump the lot right away, but it should be a signal to watch it closely. You do not want to be left holding the bag if it turns out that the financial statements were delayed for a disastrous reason, such as accounting fraud. (See also: Strategies for Quarterly Earnings Season and The Flow of Company Information.)