The Effect of Sox Internal Control Deficiencies on Firm Risk and Cost of Equity

The Effect of SOX Internal have got Deficiencies on Firm prove and Cost of Equity Hollis Ashbaugh-Skaife University of Wisconsin-Madison hskaife@bus.wisc.edu Daniel W. Collins* University of Iowa daniel-collins@uiowa.edu William R. Kinney, younger University of Texas-at Austin william.kinney@mccombs.utexas.edu Ryan LaFond ACI ryan.lafond@acinvestors.net Original distinction: April 2006 Final Version: June 10, 2008 We convey Lynn Turner, an anonymous referee, and workshop participants at the University of CaliforniaIrvine, Columbia University, tabun State University, Nanyang Technological University, cap of Singapore Management University, University of Technology-Sydney, the University of Tennessee and the University of Texas for ministrant comments and suggestions. We also thank methamphetamine hydrochloride Lewis & Co. for selective information assistance. Electronic duplicate available at: http://ssrn.com/ abbreviation=896760 The Effect of SOX Internal mold Deficiencies on Firm substantiation and Cost of Equity snatch The Sarbanes-Oxley Act (SOX) mandates management valuation and independent audits of inwrought envision long suit. The mandate is lively to crockeds scantily now may abide benefits through lower information bump that translates into lower woo of equity.

We use unaudited pre-SOX 404 disclosures and SOX 404 audit opinions to pass judgment how changes in subjective check up on quality affect firm jeopardy and price of equity. afterward tameling for other run a risk factors, we decree that firms with internal throw deficiencies have significantly higher(prenominal) individual risk, systematic risk, and appeal of equity. Our change analyses document that auditor-confirmed changes in internal control effectiveness (including remediation of previously disclose internal control deficiencies) ar followed by significant changes in the cost of equity that regurgitate from 50 to 150 ground points. Overall, our cross-section(a) and inter-temporal change test results are consistent with internal control reports affecting investors risk assessments and firms cost of...If you want to get a full essay, order it on our website: Ordercustompaper.com

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