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Article
Publication date: 18 February 2025

Parveen P. Gupta, Heibatollah Sami, Joseph H. Zhang and Haiyan Zhou

SOX Section 404 requires that public companies evaluate and have their auditors attest to the effectiveness of their internal control over financial reporting (ICFR). These…

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Abstract

Purpose

SOX Section 404 requires that public companies evaluate and have their auditors attest to the effectiveness of their internal control over financial reporting (ICFR). These companies compare their ICFR effectiveness to the Internal Control Frameworks issued by Committee of the Sponsoring Organizations of the Treadway Commission (COSO). This paper aims to examine whether the implementation of the 2013 Control Framework has a positive impact on the information environment of U.S. public companies.

Design/methodology/approach

The study sample comprises firms from the S&P 1500 index and the Russell 2000 index firms that filed their annual reports after December 15, 2014. This paper uses bid-ask spread as a primary measure of information asymmetry, while controlling for the simultaneous effects of the new COSO framework on trading volumes and price volatility.

Findings

This paper finds a significant reduction in bid-ask spreads – a proxy for an improved information environment – among our sample firms following the adoption of the 2013 Control Framework, leading us to conclude that the 2013 Control Framework represents a substantial improvement.

Research limitations/implications

This study specifically examines the impact of control frameworks on the information environment under SOX 404. Future research could explore other economic consequences associated with the adoption of the new COSO Framework. Additionally, it would be valuable to investigate whether the Cadbury model, which also qualifies as a “suitable” control framework under the SEC rules for ICFR assessments, produces similar or different outcomes. Future studies could also analyze the implementation details across all five components concerning the three types of objectives.

Practical implications

The findings will provide valuable insights for policymakers on the effectiveness of the COSO 2013 Framework in enhancing internal control reporting.

Social implications

The findings will also contribute to improving the information environment in the capital markets by guiding policymakers and regulators in assessing the effectiveness of the new COSO framework.

Originality/value

While extensive research has focused on the consequences of accounting and related internal control disclosures, there has been limited examination of how the underlying internal control benchmarks affect the quality and reliability of ICFR assessments and disclosures. This research aims to address this gap.

Details

Managerial Auditing Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 13 January 2022

Parveen P. Gupta, Kevin C.K. Lam, Heibatollah Sami and Haiyan Zhou

In this paper, the authors examine how religious and political factors affect a firm's corporate governance diversity policies.

533

Abstract

Purpose

In this paper, the authors examine how religious and political factors affect a firm's corporate governance diversity policies.

Design/methodology/approach

The authors develop five basic empirical models. Model 1 examines how religious beliefs and political affiliation determine whether a firm will establish diversity incentive in its senior executives' performance assessment. Model 2 investigates how the diversity goal, religious beliefs and political affiliation separately affect the level of actual diversity achieved. Model 3 examines how the diversity goal and environmental factors interact to affect the level of actual diversity achieved. Model 4 and Model 5 examine whether the diversity incentive in senior executives' compensation plan and the environmental factors (religious belief and political affiliation) help to reduce the compensation differentials between male and female executives.

Findings

The authors find that firms located in more liberal counties with more Mainline Protestants and less Republican voters in the United States are more likely to include workforce diversity as a criterion in evaluating their senior executives. The authors also provide evidence that firms with diversity goals have more female directors, more female senior executives and more minority directors. However, they find no evidence that the compensation differentials between male and female executives are smaller in these firms. Finally, they find that external environment affects the effectiveness of the implementation of the diversity goals.

Originality/value

In line withthis branch of research, the authors expand the literate on the link between corporate culture and corporate decision-making by investigating the non-financial performance measures. Besides the corporate decision-making in investment, financial reporting and social responsibilities as documented in prior studies, the authors argue that the religious beliefs and political affiliations could also affect the development and implementation of corporate non-financial performance goals in executive incentive contracts.

Details

Asian Review of Accounting, vol. 30 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Available. Content available
Book part
Publication date: 29 November 2012

Abstract

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

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Book part
Publication date: 29 November 2012

J. Jay Choi and Heibatollah Sami

This is a conceptual overview of transparency from the global and interdisciplinary perspectives. It briefly develops a conceptual framework on transparency as to how it relates…

Abstract

This is a conceptual overview of transparency from the global and interdisciplinary perspectives. It briefly develops a conceptual framework on transparency as to how it relates to governance and market environments, outlines conditions for transparency, and presents hypotheses concerning the level of transparency in a global world. It then summarizes 12 papers included in the research volume.

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

Keywords

Access Restricted. View access options
Book part
Publication date: 29 November 2012

Abstract

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

Available. Content available
Book part
Publication date: 29 November 2012

Abstract

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

Available. Content available
Book part
Publication date: 29 November 2012

Abstract

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

Available. Content available
Book part
Publication date: 29 November 2012

Abstract

Details

Transparency and Governance in a Global World
Type: Book
ISBN: 978-1-78052-764-2

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Book part
Publication date: 29 November 2012

Fang Fang and Haiyan Zhou

In this study, we investigate whether higher institutional ownership is related to better internal controls and whether better internal control is associated with a higher quality…

Abstract

In this study, we investigate whether higher institutional ownership is related to better internal controls and whether better internal control is associated with a higher quality of transparency.

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Book part
Publication date: 6 May 2003

Mohamad Goedono and Heibatollah Sami

Using a laboratory experiment, this study investigates agency theory determinants of managers’ adverse selection in resource allocation and an approach to solve agency problems…

Abstract

Using a laboratory experiment, this study investigates agency theory determinants of managers’ adverse selection in resource allocation and an approach to solve agency problems. The results suggest that agents who experience an incentive to shirk, have private information, and/or face less risky sunk costs exhibit a greater tendency to either choose less profitable projects or continue losing projects. Consistent with agency theory predictions, we also found that the tendency to choose less profitable projects and continue losing projects declined when agents were compensated based on a variable (outcome-based) compensation scheme.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-84950-207-8

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