The Value of Mandatory Certification: A Real Effects Perspective

• 成果类型: Article
• 署名作者: Jiang, Xu; Xin, Baohua; Xiong, Yan
• 署名单位: Duke University; University of Toronto; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12460
• 发表日期: 2023
• 页码: 377-413
• 关键词: voluntary disclosure; earnings quality; reporting regulation; INFORMATION; INVESTMENT; MARKET; COSTS; FIRMS; SOX

摘要

We study the real effects of certification to demonstrate the value of mandatory certification over and above mandatory disclosure in enhancing investment efficiency. In our model, a firm's manager selects a project to maximize the firm's short-term stock price, which is a function of her certification and disclosure decisions about the outcome of the project. Although the manager might be either forthcoming or strategic with regard to the disclosure of her private information, she can strategically choose whether to incur a cost or not to certify her disclosure, unless mandated. The manager always selects the first-best project when both certification and disclosure are mandatory. However, when certification is voluntary, project selection is inefficient. In addition, mandating disclosure without mandating certification can lead to lower investment efficiency than mandating neither. In justifying why mandatory certification is beneficial for public firms, our results offer a note of caution regarding the contemplated regulatory moves for increased disclosures by public firms without corresponding certification requirements, for example, the recent SEC proposal requiring extensive climate-related disclosure.