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

The effects of firm size, corporate governance quality, and bad news on disclosure compliance 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

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

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Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-011-9153-8
Publisher site
See Article on Publisher Site

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.

Journal

Review of Accounting StudiesSpringer Journals

Published: May 11, 2011

References

  • The economic implications of corporate financial reporting
    Graham, J; Harvey, C; Rajgopal, S
  • Market responses to earnings surprises conditional on reasons for an auditor change
    Hackenbrack, K; Hogan, C
  • Information asymmetry, corporate disclosure, and the capital markets: a review of empirical disclosure literature
    Healy, P; Palepu, K
  • The association between corporate boards, audit committees, and management earnings forecasts: An empirical analysis
    Karamanou, I; Vafaes, N
  • Do managers withhold bad news?
    Kothari, S; Shu, S; Wysocki, P

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