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The effects of firm size, corporate governance quality, and bad news on disclosure compliance

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Listed:
  • Mike Ettredge

    (School of Business, University of Kansas)

  • Karla Johnstone

    (School of Business, University of Wisconsin)

  • Mary Stone

    (Culverhouse School of Accountancy, University of Alabama)

  • Qian Wang

    (College of Business, Iowa State University)

Abstract

Motivated by calls for increased compliance, size-based regulation, and continued exemption of small firms from internal control reporting requirements, we assess the incremental effects of firm size, corporate governance quality, and bad news on disclosure compliance. We examine compliance with the disclosure requirements of an SEC-mandated filing that requires no computations or complex judgments but is nonroutine and may reveal value-decreasing information (bad news) that otherwise would not become public. The disclosures studied are those that firms provide in Form 8-K Item 4 when changing external auditors. We find that noncompliant firms have lower quality corporate governance and less need for external financing but are not smaller than compliant control firms. Additional analyses indicate that compliance is negatively associated with bad news.

Suggested Citation

  • Mike Ettredge & Karla Johnstone & Mary Stone & Qian Wang, 2011. "The effects of firm size, corporate governance quality, and bad news on disclosure compliance," Review of Accounting Studies, Springer, vol. 16(4), pages 866-889, December.
    • Handle: RePEc:spr:reaccs:v:16:y:2011:i:4:d:10.1007_s11142-011-9153-8
    DOI: 10.1007/s11142-011-9153-8
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    References listed on IDEAS

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    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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