What conclusions can you draw from Table about the relationship between excess returns on the day of the delay announcement and the independent variables used in this study? Use evidence from the results shown here to support your arguments. What is the change in excess returns if the delay is due to a business event compared to an announcement in which no reason is given (i.e., the baseline)? If a delay announcement is made in the pre-SOX period by firm that has a book-to-market ratio of 2 and a (log) size of 10, all other control variables are zero, and no reason for the delay is given, what would be the estimated excess return on the announcement day?

Silva, Fu, Noe and Ramesh (2013) conduct a study of U.S. firms announcing a delay in publishing their annual or quarterly earnings. They investigate a sample of 468 such delay announcements for the period 1995–2009.2 Their dependent variable is the one-day abnormal stock returns calculated as firm specific stock returns minus the corresponding CRSP value-weighted market index return, including dividends – in other words, the return component not explained by the overall market movement on the announcement day. The authors classify their sample according to stated reason for the delay. Reasons were classified as:

 "Accounting", subdivided into:

o "Accounting issue" explanations identified a specific accounting-related cause, such as revenue recognition or impairment testing, for the delay.

o "Accounting process" was identified as the delay reason if the period-end accounting process was not complete but a specific explanation was not provided.

o "Accounting rule change" attributed the delay to the implementation of a new accounting standard.

 "Nonaccounting", subdivided into:

o "Business" explanations attributed the delay to some event related to company operations (e.g., merger, divestiture, or regulatory proceeding).

o "Other" captured all nonbusiness reasons for delays (e.g., hurricane, earthquake, or power outage).

 No reason given.

Additional variables of interest describe whether the firm expects to meet the management’s or analysts’ earnings forecast. Earnings guidance is defined as positive (negative) if the firm expects to beat (miss) the management’s or analysts’ expectations or historical earnings, and neutral if the earnings delay announcement included a statement about earnings meeting management or analyst expectations, or the earnings effect of the delay being immaterial.

Other independent variables that are used to control for potential and known effects are

 Post-SOX: the delay announcement occurs after the passage of the Sarbanes-Oxley Act (dummy variable).

 Restatement: the earnings delay announcement mentions the possibility of restating historical financial statements (dummy variable).

 Firm size: natural logarithm of the market value of the firm’s equity

 Book-to-market ratio of the firm

 Days until earning release: number of days after the earnings delay announcement that it took to report earnings

 Change in EPS: difference in earnings per share for the delay quarter versus the same quarter a year prior, deflated by stock price on the day before the earnings delay announcement.

Variable	Coefficient	P-value
Intercept	-0.1797	<0.01
Accounting Issue	0.0313	0.25
Accounting Process	0.0404	0.13
Accounting rule change	0.0698	<0.01
Business Event	0.0814	<0.01
Other	0.0954	<0.01
Positive guidance vs expectations	0.0509	<0.01
Neutral guidance vs expectations	0.0115	<0.01
Negative guidance vs expectations	-0.0439	0.53
Post-SOX	0.0635	0.07
Restatement	-0.0153	<0.01
Firm size	0.0071	0.54
Book-to-market ratio	0.0029	<0.01
Days until earning release	-0.0004	<0.01
Change in EPS	0.1378
R-squared	0.21
Observations	468