Increased Disclosure Requirements and Corporate Governance Decisions: Evidence from Chief Financial Officers in the Pre- and Post-Sarbanes-Oxley Periods

• 成果类型: Article
• 署名作者: Wang, Xue
• 署名单位: Emory University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2010.00378.x
• 发表日期: 2010
• 页码: 885-920
• 关键词: internal control deficiencies; economic consequences; control weaknesses; ACT; cost; INFORMATION; management; RESTATEMENTS

摘要

I study how increased internal control disclosure requirements mandated by the Sarbanes-Oxley Act (SOX) affect annual corporate governance decisions regarding CFOs. Using non-CEO, non-COO executive officers as a control group, I find that CFOs of firms with weak internal controls receive lower compensation and experience higher forced turnover rates after the passage of SOX. In contrast, CFOs of firms with strong internal controls receive higher compensation and do not experience significant changes in forced turnover rates. These results are consistent with the disclosure of type hypothesis, which suggests that the mandatory internal control disclosures under SOX are a credible mechanism that effectively distinguishes good CFOs from bad ones by revealing the firm's internal control quality. The empirical evidence thus supports the notion that mandated increases in disclosure reduce information asymmetry in the executive labor market.