We argue that obligatory compliance with stricter financial reporting rules (e.g., the US Sarbanes-Oxley Act) may entail important unintended consequences. Paradoxically, the amount of misreporting may increase because corporate boards spend more valuable resources fulfilling statutory mandates...

The scandal that followed Enron's failure to disclose billions of dollars of debt held by off-balance sheet entities (OBSEs) prompted investor interest in these entities, and motivated auditors to request more guidance. The SEC responded by issuing Financial Release 61 (FR-61) to remind managers...

We document that accrual-based earnings management increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased...

This study investigates if the level of discretionary accruals (DAs) is different for companies whose corporate governance level is certified by Bovespa compared to those ones that are not. And also for companies whose stocks negotiated at Bovespa have high liquidity compared to the ones with...

A firm meets or beats expectations when it reports earnings that are at or above the consensus analysts' forecast. We argue that two types of firms MBE: strong firms who commit to future performance and signal future earnings by MBE, and weak firms who attempt to mimic strong firms by managing...

Asymmetric information and mechanisms for its resolution in the initial public offering (IPO) process are subjects of extensive research and debate. In this paper, we investigate the impact of one such mechanism, namely voluntary disclosure of management earnings forecasts by issuers of IPOs, as...

This paper explores directly the effect of internal control weakness (hereafter ICW) and their remediation on information precision for firms who filed Section 404 reports with the SEC. Our proxies for information precision are drawn from Barron et al. (1998). First, we find that the presence of...

We examine the effect of the Sarbanes-Oxley Act (SOX) on the extent of aggressive/conservative reporting behavior of public companies. SOX imposes considerably greater potential penalties on CEO/CFOs who engage in financial wrongdoing; therefore, risk averse managers are likely to report lower...

This study investigates whether having a Sarbanes-Oxley Section 404 [SOX 404] material weakness allows managers of these firms to manipulate earnings to a greater extent using discretionary accruals than managers of firms with no SOX 404 material weaknesses. The study focuses on a sample of 218...

This study examines whether boards discipline CEOs and CFOs more severely for accounting restatements after passage of the Sarbanes-Oxley Act (SOX). The disciplinary actions I focus on are job termination and reductions in bonus payouts. Boards have incentive to take the highly visible action of...