We find evidence that public firm disclosure, in the form of Management Discussion and Analysis (Sections 7 and 7a of annual reports), is more informative about the firm’s future risk following the passage of the Sarbanes-Oxley Act of 2002. Employing a novel text regression, we are able to predict, out of sample, firm return volatility using the Management Discussion and Analysis section from a...

Many target CEOs receive unscheduled stock option awards during merger negotiations which become immediately exercisable when the acquisition is completed. We find an inverse association between the size of golden parachutes given to target CEOs and the probability that these executives receive unscheduled options during merger negotiations. These unscheduled awards are also more likely to be i...

Financial scandals and the related increase in mistrust of investors represented in the public view through the Enron and Worldcom cases led to various legal and community driven initiatives in recent years resulting in a tighter regulation context for companies with the overall goal to regain and strengthen stakeholders’ confidence and trust. The paper at hand presents how IT can support regul...

The Sarbanes-Oxley Act (SOX) mandates management evaluation and independent audits of internal control effectiveness. The mandate is costly to firms but may yield benefits through lower information risk that translates into lower cost of equity. We use unaudited pre-SOX 404 disclosures and SOX 404 audit opinions to assess how changes in internal control quality affect firm risk and cost of equi...

Past studies show that only a small percent of organizations implement and enforce formal rules or informal guidelines for the designing, testing, documenting, using, modifying, sharing and archiving of spreadsheet models. Due to lack of such policies, there has been little research on how companies can effectively govern spreadsheets throughout their life cycle. This paper describes a survey i...

Along with the significance of information systems in today’s global business operation, the significance of information systems control and audit is ever increasing in the effort to secure accuracy and integrity of vital business data. A study is undertaken to integrate Food and Drug Administration computerized systems validation regulations, Securities & Exchange Commission Sarbanes-Oxley Act...

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income. Empirically SOX (i) changes the relationship between a firm’s abnormal returns and CEO compensation, (ii) changes the underlying distribution of abnormal returns, and (iii) significant...