This paper examines the effect of Sarbanes-Oxley provisions on 10-K filing delays. We find that tightened filing deadlines for accelerated and large accelerated filers are not associated with changes in the incidence of late filing. While Section 404 compliance does not affect filing timeliness for firms with effective internal controls, we find that about half the firms disclosing internal control weaknesses are late filers. As a consequence, many Section 404 material weakness firms experience negative abnormal returns around late filing notifications before filing the 10-K. Lastly, we find that market reactions to late filing notifications are more negative when management provides no meaningful explanation for the delay, consistent with managers' incentives to withhold bad news.

This study reports on desirable attributes of assurance services providers for assurance services based on responses from a sample of Dutch senior accounting and financial officers. In general, overall expertise and objectivity are perceived as the most important attributes for selecting an assurance service provider. Cost is perceived as the least important attribute. In general, accountants are perceived as more likely to be the preferred service provider for assurance over information systems and/or when professional reputation and integrity is important for providing a service. These attributes are in line with the projected image of the profession. An accountant is less likely to be the preferred provider when cost and independence are not important. We interpret this result as an indication that independence in the audit is important and, thus, other services are acceptable only when independence is not an issue.

In this paper, we test whether directors' (corporate insiders) trading in Australia, based on accounting accruals, provides incremental information in forecasting a firm's economic performance. We determine that directors' trading on negative accruals in larger firms has greater forecasting content and is associated with 1-year-ahead bull market phases. Moreover, arbitrage portfolios set up to mimic insider trading can earn 1-year-ahead excess size-adjusted arbitrage returns of up to 12.2 per cent. Results are consistent with directors hiding their trades in liquid well-traded firms and in providing incremental information above that supplied by a continuous information regime. Copyright (c) The Authors Journal compilation (c) 2006 AFAANZ.

This paper examines the information content of stock option exercises versus regular insider share trades by corporate executives. We argue that the asymmetric payoff structure of options makes managerial wealth -compared to holdings of shares -relatively more sensitive to stock price changes and more likely induces opportunistic behaviour. Consistent with our predictions, we find option exercises followed by share liquidations are associated with disappointing future earnings news, while sales of previously held shares are not. In addition, liquidation exercises of deep in-the-money options are associated with larger incomeincreasing abnormal accruals, signalling lower quality earnings. On the buy side, we find that regular insider share purchases are associated with positive future earnings news while purchases through option conversions are not. This research has implications for investors, compensation committees, and future research on corporate insider trades.

No abstract