Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?
AbstractWe provide more direct evidence on the causal relation between the quality of financial reporting and investment efficiency. We examine the investment behavior of a sample of firms that disclosed internal control weaknesses under the Sarbanes-Oxley Act. We find that prior to the disclosure, these firms under-invest (over-invest) when they are financially constrained (unconstrained). More importantly, we find that after the disclosure, these firms’ investment efficiency improves significantly.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 56 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jae
Effectiveness of internal control over financial reporting; Investment efficiency; Disclosure;
Find related papers by JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- M48 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Government Policy and Regulation
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- Waters, James, 2013. "The Sarbanes-Oxley Act, industrial innovation, and real option creation," MPRA Paper 49173, University Library of Munich, Germany.
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