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The Effects of Firm Size, Corporate Governance Quality, and Bad News on Disclosure Compliance
Ettredge, Michael L. Johnstone, Karla Stone, Mary S. Wang, Qian
Ettredge, Michael L.
Johnstone, Karla
Stone, Mary S.
Wang, Qian
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Abstract
Motivated by calls for increased compliance, size-based regulation, and continued exemption of
small firms from internal control reporting requirements, we assess the incremental effects of
firm size, corporate governance quality, and bad news on disclosure compliance. We examine
compliance with the disclosure requirements of an SEC-mandated filing that requires no
computations or complex judgments, but is non-routine and may reveal value-decreasing
information (i.e., bad news) that otherwise would not become public. The disclosures studied
are those that firms provide in Form 8-K Item 4 when changing external auditors. We find that
non-compliant firms have lower quality corporate governance and less need for external
financing, but are not smaller than compliant control firms. Additional analyses indicate that
compliance is negatively associated with bad news.
Description
This is the author's accepted manuscript, the publisher's official version is available at: <http://link.springer.com/article/10.1007%2Fs11142-011-9153-8>.
Date
2011
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Springer
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Keywords
Auditor change, Compliance, Mandatory disclosure, SEC staff comment letters, Size-based regulation
Citation
Ettredge, Michael. (2011) The Effects of Company Size, Corporate Governance Quality, and Bad
News on Disclosure Compliance. Review of Accounting Studies.