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Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?

  • Cheng, Mei
  • Dhaliwal, Dan
  • Zhang, Yuan
Registered author(s):

    We 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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    File URL: http://www.sciencedirect.com/science/article/pii/S0165410113000165
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    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 56 (2013)
    Issue (Month): 1 ()
    Pages: 1-18

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    Handle: RePEc:eee:jaecon:v:56:y:2013:i:1:p:1-18
    Contact details of provider: Web page: http://www.elsevier.com/locate/jae

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