Initial Public Offerings Disclosures of Voluntary Internal Control Weakness for Determinants Financial Reporting Quality

In this research determined registrants’ incentives to unveil internal control weaknesses (ICWs) voluntarily in IPO registration statements and their post-IPO financial reporting quality. Using a sample of initial public offering (IPO) registrants from 2005-2015, it locate that expanding the board s revelation believability, by contracting another CEO in the IPO, is a motivating force to incorporate ICWs in IPO enrollment proclamations. It find that management does build credibility with underwriters evidenced by IPO registrants that disclose ICWs voluntarily are associated with higher IPO offer prices. It find that registrants voluntary ICW disclosures are informative and are associated with negative cumulative abnormal returns only when an auditor issues an adverse after the disclosure. IPO registrants that voluntarily disclose ICWs and receive unqualified auditor opinions appear to be successful in mitigating negative cumulative abnormal returns. Findings provide evidence that misstatements appear to outpace material weakness. The post-IPO money related announcing quality outcomes are opportune and applicable to controllers on the grounds that the connection among misquotes and inadequate review feelings is confusing. Finally, this study’s results are important to investors because the purpose is to provide an advanced warning of financial reporting weaknesses.

Keywords:

Disclosures of Voluntary Internal Control Weakness , Determinants Financial , Public Offerings