The Impact of Meeting Analyst Earnings Expectations on the Market Response to the Announcement of Internal Control Weaknesses

In this study, I examine the impact of meeting analyst earning expectations on the market response to material weakness disclosures identified under Sections 302 and 404 of the Sarbanes-Oxley Act of 2020. Utilizing a sample period spanning 15 years, I find that the market response to material weakness disclosures is significantly influenced by earnings outcomes. The market response to 404 material weakness disclosures for firms that missed earnings is 1.7% lower than firms that met or beat earnings expectations, while the market response to 302 material weakness disclosures is 2.1% lower for firms that missed earnings. I find evidence that new material weaknesses disclosed under SOX 404 are associated with more negative market response compared to repeating material weaknesses, however no such difference exists for material weaknesses disclosed under SOX 302. I also find that the number of material weaknesses disclosed under SOX 302 and 404 is on the rise over the past decade.

Grantor dc:publisher

Creighton University

Year dc:date.issued

2021

Author dc:creator

• Weinberger, Andrew

Advisor dc:contributor.advisor

• Hoag, Matthew

Statement dc:rights

• Copyright is retained by the Author. A non-exclusive distribution right is granted to Creighton University and to ProQuest following the publishing model selected above.

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/10504/129804

OAI identifier oai:identifier

oai:cdr.creighton.edu:10504/129804