On 12 November 2021, the European Commission (‘EC’) published a consultation document on strengthening quality of corporate reporting and its enforcement by addressing shortcomings in underlying ecosystem. The duties this EC initiative include examining role that internal controls can play achieving high standard reporting. present article examines existing in-control regime United States wheth...

We study the impact of firms’ abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms' deviation in real operations from industry norms (DRO) is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DA) and crash risk found by prior st...

In the wake of financial frauds and related audit issues, the US Congress passed the Sarbanes-Oxley (SARBOX) Act of 2002. Key to becoming SARBOX compliant are information systems (IS) that satisfy the mandates regarding internal controls, corporate governance, and fraud detection. These legal developments focusing senior management's attention on (1) internal controls are present and functionin...

Over the past few years, cases of miserable failure in corporate governance have shocked the financial world. Enron and WorldCom are just two examples of how a few people in a position of power can cause unprecedented damage to hundreds of thousands of people, including investors, employees, and retirees. Lessons thus learned created a wave of regulations, the most significant being the Sarba...

This paper exploits a natural quasi-experiment to investigate the effects of the Sarbanes-Oxley Act (SOX) on corporate innovation: firms with a public float under $75 million can delay compliance with Section 404 of the Act. We find a significant decrease in the number of patents and patent citations for firms that are subject to Section 404 compliance relative to firms that are not. This effec...

Since the introduction of the Sarbanes-Oxley (SOX) Act in 2002, companies have begun to place more emphasis on information technology (IT) internal controls. IT internal controls are policies that provide assurance that technical systems operate as intended, provide reliable data, and comply with regulations. Research suggests that firms with strong internal controls perform better than those w...

Seen as an essential element of economic development, corporate governance has been at the center debate since 1990s. Its crucial interest for good functioning financial markets is strongly mentioned. Over last two decades, motivations opting have diverse and varied: Cadbury report, OECD reports, reflections Basel Committee, adoption Sarbanes-Oxley Act (or SOX) in 2002 United States, work on "c...