Market Reactions to Disclosure of Reportable Events

Whisenant, Scott; Sankaraguruswamy, Srinivasan; Raghunandan, K.

doi:10.2139/ssrn.293404

Cited by 18 publications

(44 citation statements)

References 10 publications

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“…For example, Schwartz and Soo's (1995) indicating problems with financial statement reliability are also associated with negative stock price reactions, while those related only to internal control events are not (Whisenant et al 2003). Smith (1988) provides additional evidence of negative market reaction to auditor change bad news.…”

Section: Bad News In 8-k Itemmentioning

confidence: 99%

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The effects of firm size, corporate governance quality, and bad news on disclosure compliance

et al. 2011

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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. Electronic copy available at: http://ssrn.com/abstract=955922The effects of firm size, corporate governance quality, and bad news on disclosure compliance 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 nonroutine 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.

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Section: Bad News In 8-k Itemmentioning

confidence: 99%

“…Item 4 filings and the negative market reaction to bad news disclosed in them (e.g., DeFond et al 1997;Krishnan and Krishnan 1997;Wells and Louder 1997;Hackenbrack and Hogan 2002;Whisenant et al 2003;Sankaraguruswamy and Whisenant 2004) provides an alternative (to size) explanation for firm failures in disclosure compliance: suppression of bad news.…”

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confidence: 99%

The effects of firm size, corporate governance quality, and bad news on disclosure compliance

et al. 2011

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“…The auditor-change related literature examines questions such as whether disclosures of auditor changes are made promptly (Schwartz and Soo 1996;Ettredge et al 2001) and whether such disclosures have information content (Whisenant et al 2003). The earnings announcement literature is extensive and addresses issues including the timing of the announcements (Chambers and Penman 1984;Begley and Fischer 1998), the persistent drift of stock prices after to the announcements Thomas 1989, 1990;Collins and Hribar 2000), and, of course, the market reaction around the earnings announcements.…”

Section: Prior Studiesmentioning

confidence: 99%

The new Form 8-K disclosures

2009

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The Securities and Exchange Commission (SEC) has mandated new disclosure requirements in Form 8-K, which became effective on August 23, 2004. The SEC expanded the list of items that have to be reported and accelerated the timeliness of these reports. This study examines the market reactions to 8-Ks filed under the new SEC regime and investigates whether periodic reports (10-K/Qs) became less informative under the new 8-K disclosure rules. We observe that the newly required 8-K items constitute over half of all filings and that most firms disclose the required items within the new shortened period (four business days). We find that all disclosed items (old and new) are associated with abnormal volume and return volatility around both the event and the SEC filing dates, and some items have significant return drifts after the SEC filings. Surprisingly, we find that the information content of periodic reports has not diminished by the more expansive and timely 8-K disclosures under the new guidance, possibly indicating that investors may use periodic filings to interpret the effects of material events that had been disclosed earlier.

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“…Research of Simon and Francis (1988) and Whisenant, Sankaraguruswamy, and Raghunandan (2003) suggest that liability is a measurement of auditing risk. Thus higher audit fees is expected for higher risk.…”

Section: Audit Feesmentioning

confidence: 99%

Fair Value Information, Audit fees and Audit Committee in Taiwan

Wu¹,

Wu²,

Yang³

2017

IJFR

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Regulatory requirements to adopt IFRS and to disclose audit fees make it possible to examine association between audit fees and proportion of fair-valued assets among firms in Taiwan. A voluntary choice of adding audit committee in the firm for monitoring purpose also helps to examine the association further. Empirical results indicate that lower audit fees is related to higher proportion of (Level 2) fair-valued assets, a finding consistent to Goncharov et al.'s (2014) suggestion that firms pay lower audit fees with fair-value model than with cost model. Insignificant association is found for proportion of Level 3 fair-valued assets, which is similar to Glover et al. 's (2014) suggestion that firm's reluctant attitude in adopting Level 3 assets. Last of all, when audit committee is added, firm's audit fees is negatively associated with Level 1 and 2 fair-valued assets, implying audit committee's role of monitoring and further reducing audit risk and audit fees among Taiwanese firms.

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Market Reactions to Disclosure of Reportable Events

Cited by 18 publications

References 10 publications

The effects of firm size, corporate governance quality, and bad news on disclosure compliance

The effects of firm size, corporate governance quality, and bad news on disclosure compliance

The new Form 8-K disclosures

Fair Value Information, Audit fees and Audit Committee in Taiwan

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