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The impact on stock prices of deferral and elimination of internal control audit requirement for small firms

Authors :
Reza Espahbodi
Hassan Espahbodi
Source :
Journal of Contemporary Accounting & Economics. 15:158-166
Publication Year :
2019
Publisher :
Elsevier BV, 2019.

Abstract

This paper examines the cumulative market reaction to the events related to deferral of internal control audit requirement under the Sarbanes-Oxley Act of 2002 and its elimination under the Dodd-Frank Act of 2010 for nonaccelerated filers (small firms). We document that small firms experienced negative cumulative abnormal returns around these events; and the differences between the cumulative abnormal returns for small firms and the two control groups (accelerated and large accelerated filers) were negative and significant at the 1% level. These results support the notion that market participants value the reliability of financial information irrespective of the firm size. Within the small firms, we find no firm characteristic significantly explains the market reaction to the events considered. That is, all small firms lost market value in reaction to the events that delayed and eliminated their internal control audit requirement.

Details

ISSN :
18155669
Volume :
15
Database :
OpenAIRE
Journal :
Journal of Contemporary Accounting & Economics
Accession number :
edsair.doi...........3da480574ee50f5b546426fff73944f6
Full Text :
https://doi.org/10.1016/j.jcae.2019.04.002