It should come as no surprise that capital markets react negatively to a company's late filing of an annual or quarterly report. But this reaction is more pronounced when a company announces a delay in its 10-Q.

In establishing this in research, Professors Eli Bartov of New York University's Stern School of Business and Mark Defond and Yaniv Konchitchki of the University of Southern California's Marshall School looked at 2,115 first-time filers of form NT -- which late 10-K annual and 10-Q quarterly filers are required to submit to the SEC within one day of the missed deadline --between 2000 and 2008.

When the results for both for NT 10-K and 10-Q were pooled, the researchers found that the stock market response was "significantly negative," with share prices losing an overall 2.44% within two days (plus or minus) of the announcement. But the response to late quarterly reports was significantly more negative, with company stocks losing 2.93% of their value within the same timeframe, as opposed to 1.96 percent for annual reports.

"The stronger negative reaction to the news of late 10-Q filings is consistent with the market interpreting management's inability to comply with Form 10-Q requirements, which are significantly less onerous than Form 10-K requirements as a signal of more serious underlying problems," the professors write. "Late 10-Q filings have distinct valuation implications."

The research also correlated negative reactions to the cause of late 10-Qs and 10-Ks. Accounting reasons led to a share-price fall of 2.83% for late 10-Qs, as opposed to 1.09% for 10-Ks. Companies citing multiple reasons for delay, not surprisingly, fared the worst, losing 5.48% for 10-Qs and 4.73% for 10-Ks.

In addition, the study found that the market anticipates which late 10-Q filers will subsequently fail to file within the SEC's allowed five-day grace period, but only when accounting reasons explain the delay. And the market will continue to punish companies for missing quarterly deadlines for accounting reasons in the future, while negative effects caused by other late-filing reasons will tend to level off.

"This evidence suggests that investors are better able to interpret the valuation implications of accounting-caused late filers and react immediately to the late-filing announcement," say the researchers.