This study examines whether annual financial statements filed with the Securities and Exchange Commission are timely sources of information for investors. We examine a summary measure, the probability of bankruptcy, through which the release of financial statements might communicate information to investors. The results indicate that a significant association exists between revisions in the probability of bankruptcy due to nonearnings data and security returns over the fiscal year, but that investors have largely revised their estimates of the probability of bankruptcy prior to the release of the full financial statements.

Presents the findings of the tests for stock price response to disclosure of 1974 last in, first out (LIFO) inventory accounting decisions by adopting and non-adopting firms in the United States. Model of stock price change upon a firm's disclosure of a LIFO decision; Model and research design; Identification of disclosure interval; Estimates of LIFO adoption probabilities.

[During 1974-75, more than a fourth of the manufacturing and merchandising firms listed on the New York Stock Exchange and the American Stock Exchange adopted or extended their use of the last-in, first-out (LIFO) method of inventory accounting. Because a change to LIFO accounting can materially affect a firm's cash flows, the stock price behavior of firms adopting LIFO during fiscal year 1974 has been studied extensively. However, existing studies provide little evidence that stock price movements during the period were directly linked with LIFO adoption. In this article, we report the results of new tests for a stock price response to disclosures of 1974 LIFO decisions by both adopting and non-adopting firms. Our tests assume that, prior to disclosure, prices reflect available information about the likelihood of LIFO adoption. This implies (for both groups of firms) that the stock price change in response to disclosure of the LIFO decision depends on investors' revisions in their beliefs regarding the probability of adoption caused by the disclosure. We use this implication to design tests of the null hypothesis of no association between stock price movements and the disclosure of 1974 LIFO decisions. Our tests are based on a sample of 487 firms that could have adopted LIFO during fiscal 1974. For each firm, we first identify an interval that includes the disclosure of its LIFO decision. We then estimate the probability of LIFO adoption at the beginning of that interval on the basis of information that was available at the time. Finally, we regress disclosure-interval stock returns on revisions in the probability of adoption resulting from disclosure of the decision. Our results provide strong evidence of a price response for nonadopting firms and weaker evidence of a price response for adopting firms.]