Strategic Timing of 8-K Filings by Privately Owned Firms

Abstract

SYNOPSIS Managers have discretion over the day of the week and the time of day that 8-Ks are filed with the Securities and Exchange Commission (SEC), so they can elect to file an 8-K containing negative news at times with lower market attention. Several recent studies find various stock price-related incentives for strategic filing behavior for firms with publicly traded equity. In this study, we use 8-K filings from firms with public filings (mostly from public debt) but non-public equity ownership from 2004–2014 to explore the strategic timing behavior of firms without stock price motivations. Consistent with strategic disclosure, we find evidence that bad news 8-Ks are more likely to be filed when market attention is lower (just after markets close, on Fridays, and after markets close on Fridays) even absent stock price concerns. Cross-sectionally, we find more strategic timing for firms with external scrutiny from analysts and credit rating agencies, despite the sophistication of those market participants. Within firms, we also find more strategic timing around public debt offerings, a time of increased market scrutiny for private firms. Lastly, we use EDGAR download data to provide supporting evidence that strategic timing of bad news disclosures does reduce short-window stakeholder attention to the bad news. Overall, we provide evidence that privately owned firms behave strategically within the 8-K reporting rules despite the lack of stock price incentives.