1、2120 单词， 12700 英文字符， 4040 汉字 出处： M.D.Beneish,M.Billings,L.Hodder.Internal Control Weaknesses and Information, UncertaintyKelley School of Business ,Indiana University,2005. 原文一： Internal Control Weaknesses and Information Uncertainty Abstract Using a sample of 336 firms making reports required by th
2、e Sarbanes-Oxley Act, we examine the effect of mandated internal control weaknesses disclosures on information uncertainty for disclosing firms and for size- and performance-matched non-disclosing firms. We find a significantly negative (weakly positive) price response for disclosing (non-disclosing
3、) firmsconsistent with resolution of information uncertainty in both groups. For disclosing firms we find that the negative market response to disclosure is exacerbated by conditions associated with higherinherent reporting risk, including auditor turnover and high-risk industry membership. However,
4、 we find that the negative market response to disclosure is mitigated when the firm has engaged a high quality auditor. In addition, we find that the negative market reaction for disclosing firms is dampened when the firms previously reported earnings have an abnormally high accruals component. This
5、 result is consistent with the disclosure having lower information content when poor earnings quality has already been conveyed by high abnormal accruals. Introduction Recent accounting scandals have led to increased interest into the determinants and consequences of low financial reporting quality.
6、 A series of congressional inquiries into the integrity of financial reporting systems in the United States culminated with the passage of the Sarbanes-Oxley Act (SOX) in 2002. Among other provisions, SOX requires firms to identify and disclose material weaknesses in internal controls over financial
7、 reporting. One potential effect ofthese disclosures is a reduction of the average level of information uncertainty in the market. Easley and OHara (2004) shows that information uncertainty may be a non-diversifiable risk factor priced by investors. Therefore, regulation that reduces systematic info
8、rmation risk may reduce the average cost of equity and promote economic growth. In this paper, we focus on the market response to mandated disclosures that provide information about the credibility of firms financial reporting systems. First, we measure abnormal returns over the three-day window sur
9、rounding the disclosure event to determine whether the market response to disclosing (non-disclosing) firms is consistent with an increase (decrease) in perceived information uncertainty. Second, we examine factors expected to exacerbate or mitigate the market response to the disclosures, including
10、audit quality, industry membership, auditor turnover, prior restatements and previous signals of low earnings quality. Third, we perform two tests to determine whether the negative market response is consistent with higher perceived information risk. Specifically, we evaluate whether the markets res
11、ponse to earnings announcements declines when weaknesses are disclosed, consistent with lower perceived informativeness of earnings. We also evaluate whether abnormal trading volume increases with disclosure, consistent with greater information uncertainty for disclosing firms. Our study contributes
12、 to three important streams of research. The first is how the quality of financial disclosures affects the capital markets. Prior research has been subject to limited availability of meaningful proxies for financial reporting quality. For example, Botosan (1997) and Botosan and Plumlee (2002) provid
13、e some evidence that the quantity of disclosures is negatively associated with the cost of equity for firms with low analyst following. However, inferences are limited to the extent that disclosure quantity does not capture disclosure quality. Similarly, the documentation of disproportionately negat
14、ive reactions to financial reportrestatements is consistent with the pricing of increased information uncertainty (Hribar and Jenkins, 2004, Palmrose et al., 2004). However, restatement announcements confound information about future financial performance with information about the credibility of th
15、e firms financial reporting system. In contrast, our setting allows us to evaluate the capital market effects of disclosures directly targeted at the quality of individual firms financial reporting system separately from disclosures about financial performance. Our study also contributes to research
16、 that investigates how auditor attestation affects the perceived credibility of financial reporting systems. Teoh and Wong (1993) finds that firms engaging high quality auditors have higher earnings response coefficients. Becker et al. (1998) finds that firms engaging high quality auditors have lowe
17、r discretionary accruals. However, these results are consistent either with the selection of high quality auditors by high quality firms, or with the engagement of high quality auditors resulting in higher perceived earnings quality. In contrast, our setting allows us to examine the marginal effect
18、of auditor type on the market reaction to an uncertainty-increasing event. Finding a positive effect of audit quality on information uncertainty in this setting is consistent with the engagement of high-quality auditors resulting in higher actual or perceived financial reporting quality. Finally, ou
19、r paper contributes to the stream of research assessing the effects of Sarbanes-Oxley provisions on the financial reporting environment, for which results have been mixed. Li et al. (2004) and Jain and Rezaee (2003) document a positive market reaction to the regulatory proposals culminating with the
20、 passage of SOX, consistent with SOX having a net beneficial effect on the quality of financial reporting. Consistent with these results, Jain et al. (2004) finds that information uncertainty reflected in bid-ask spreads declined subsequent to SOX. In contrast, Cohen et al. (2004) finds no change in
21、 earnings informativeness following the passage of SOX and Bhattacharya et al. (2002) finds no significant market response to CEO and CFO certification requirement.Each of these studies primarily addresses perceived changes in the average information environment and all but Bhattacharya et al (2002)
22、 are based on anticipated rather than actual implementation of SOX. In contrast, our study focuses on the effect on firm-specific information uncertainty of disclosures about reporting quality resulting from implementation of SOX. Hence, our analysis can reveal significant individual effects that might cancel out in aggregate, and the power of our tests is potentially stronger. Our paper contains the following results. First, we find a significantly negative (weakly positive) price response for disclosing (non-disclosing) firms consistent with
