IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v50y2023i9-10p1836-1866.html
   My bibliography  Save this article

The joint influence of Sarbanes‐Oxley and FAS123R on financial misreporting

Author

Listed:
  • Robert T. Davis
  • Thomas J. Lopez
  • Troy Pollard

Abstract

Prior research reports that a manager's equity risk‐taking incentive (vega) is positively associated with financial misreporting. FAS 123R led to a significant decrease in vega while SOX increased the cost of financial misreporting. Consistent with the original intent of the legislation, we find that SOX contributed to significant decreases in both fraud restatements and AAERs. Importantly, our results suggest that the SOX‐induced decreases in fraud restatements and AAERs have endured to more recent years. On the other hand, while we find evidence that equity‐incentive‐motivated financial misreporting ceased to exist in the immediate years after FAS 123R, we also find that this was only temporary. In particular, we find strong evidence of a significantly positive association between vega and accrual misreporting in more recent years.

Suggested Citation

  • Robert T. Davis & Thomas J. Lopez & Troy Pollard, 2023. "The joint influence of Sarbanes‐Oxley and FAS123R on financial misreporting," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(9-10), pages 1836-1866, October.
    • Handle: RePEc:bla:jbfnac:v:50:y:2023:i:9-10:p:1836-1866
    DOI: 10.1111/jbfa.12670
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jbfa.12670
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jbfa.12670?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:50:y:2023:i:9-10:p:1836-1866. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.