Internal control weakness and cost of equity: Evidence from SOX section 404 disclosures

• 成果类型: Article
• 署名作者: Ogneva, Maria; Subramanyam, K. R.; Raghunandan, K.
• 署名单位: University of Southern California; State University System of Florida; Florida International University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2007.82.5.1255
• 发表日期: 2007
• 页码: 1255-1297
• 关键词: IMPLIED COST; earnings; RISK; determinants; INFORMATION; forecasts; return; LEVEL

摘要

We examine the association between cost of equity and internal control weakness (ICW) for firms that filed first-time Section 404 reports with the SEC. Using several proxies, we find higher implied cost of equity associated with ICW firms than for a control sample of firms that disclosed no ICW. However, the higher cost of equity associated with ICW disappears after controlling for primitive firm characteristics and for analyst forecast bias. Overall, we find that, on average, ICWs are not directly associated with higher cost of equity.