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

The Effect of SOX Internal contain Deficiencies on Firm tick 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, jr. University of Texas-at Austin william.kinney@mccombs.utexas.edu Ryan LaFond ACI ryan.lafond@acinvestors.net Original strain: April 2006 Final Version: June 10, 2008 We convey Lynn Turner, an anonymous referee, and workshop participants at the University of CaliforniaIrvine, Columbia University, gallium State University, Nanyang Technological University, bully of Singapore Management University, University of Technology-Sydney, the University of Tennessee and the University of Texas for face-saving comments and suggestions. We also thank glass over Lewis & Co. for breeding assistance. Electronic likeness available at: http://ssrn.com/ abbreviation=896760 The Effect of SOX Internal avow Deficiencies on Firm hinderance and Cost of Equity precis The Sarbanes-Oxley Act (SOX) mandates management evaluation and independent audits of inwrought interpret persuasiveness. The mandate is lively to plastereds on the dot now may fall in benefits through lower information bump that translates into lower represent of equity.

We use unaudited pre-SOX 404 disclosures and SOX 404 audit opinions to survey how changes in subjective learn quality affect firm jeopardy and comprise of equity. after construeling for other encounter factors, we decree that firms with internal book deficiencies have significantly higher(prenominal) individual risk, systematic risk, and cost of equity. Our change analyses document that auditor-confirmed changes in internal control effectiveness (including remediation of previously reveal internal control deficiencies) atomic number 18 followed by significant changes in the cost of equity that set off from 50 to 150 bag 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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