Information Content of Internal Control Weaknesses: The Evidence from Japan

Riku Nishizaki, Yudai Takano, Fumiko Takeda

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

This paper investigates how capital markets in a code-law country, Japan, react to the disclosure of internal control weaknesses (ICW). The Japanese government attempted to implement a more concise, efficient, and, thus, less strict internal control reporting system than Section 404 of the US-SOX. In fact, for the first two years, the disclosure rate of ICW has been much lower in Japan than in the U.S. While market reactions to the disclosure of ICW are not significantly different from zero in our event study analysis, they become significantly negative after controlling for other information released around the disclosure date, audit quality, and other firm attributes. Our results are consistent with the notion that the disclosure of ICW is informative to the market because it is less frequent and exceptional in Japan.

Original languageEnglish
Pages (from-to)1-26
Number of pages26
JournalInternational Journal of Accounting
Volume49
Issue number1
DOIs
Publication statusPublished - 2014 Mar
Externally publishedYes

Keywords

  • Disclosure
  • Event study
  • Institution
  • Internal control
  • Regulation
  • Sarbanes-oxley act

ASJC Scopus subject areas

  • Accounting
  • Finance

Fingerprint

Dive into the research topics of 'Information Content of Internal Control Weaknesses: The Evidence from Japan'. Together they form a unique fingerprint.

Cite this