In:
Journal of Accounting, Auditing & Finance, SAGE Publications, Vol. 25, No. 1 ( 2010-01), p. 1-26
Abstract:
We examine the effect of the Sarbanes-Oxley Act (SOX) on the extent of aggressive versus conservative reporting behavior of public companies. SOX imposes considerably greater potential penalties on chief executive officers (CEOs) and chief financial officers (CFOs) who engage in financial wrongdoing. Therefore, risk-averse managers are likely to report lower earnings by reducing discretionary accruals following SOX. Our results, based on a matched sample of dual-listed Canadian firms and their domestically listed counterparts, indicate that (1) firms subject to SOX are more conservative in financial reporting in the post-SOX period as evidenced by lower signed discretionary accruals, the Ball and Shivakumar (2005) conditional conservatism measure, and the Penman and Zhang (2002) unconditional conservatism measure; and (2) the impact of SOX on firms' conservative reporting through discretionary accruals in the post-SOX period is not homogeneous—that is, it is more pronounced for firms that were aggressive in the pre-SOX period.
Type of Medium:
Online Resource
ISSN:
0148-558X
,
2160-4061
DOI:
10.1177/0148558X1002500101
Language:
English
Publisher:
SAGE Publications
Publication Date:
2010
detail.hit.zdb_id:
2067574-4
SSG:
3,2
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