دانلود رایگان مقاله انگلیسی تاثیر آشکار سازی الزامی ضعف های کنترل داخلی بر تصمیم گیری های شرکت - Sage 2018

Abstract

We examine the impact of internal control weaknesses (ICWs) on firms’ financing choices and how firms alter their financing behavior after the mandated disclosure of ICWs. We find that, before disclosure, ICW firms tend to seek external financing more than non-ICW firms do and are more likely to use equity financing as opposed to debt. After the disclosure, however, ICW and non-ICW firms exhibit similar financing preferences. In exploring the motivations for equity financing, we find that ICW firms are more prone than non-ICW firms to use the equity proceeds to fund investments and that this penchant disappears post-disclosure. The overall evidence indicates that ICW disclosure alters the information environment and managerial incentives, which has significant impact on firms’ financing decisions.

Conclusion

We examine the impact of ICWs on firms’ financing choices and whether and how firms alter their financing choices after the mandated disclosure of ICWs. We find that ICW firms are more likely to seek external financing than non-ICW firms before disclosing their ICWs but, post-disclosure, become similar in respect of external financing. This suggests that the previously documented increases in the cost of capital suppress ICW firms’ proclivity for external capital rather than make external financing difficult. More importantly, we find that, pre-disclosure, ICW firms are more likely than non-ICW firms to use equity financing as opposed to debt and that this propensity vanishes post-disclosure. To illuminate ICW firms’ motives for taking on greater equity financing pre-disclosure, we examine the use of proceeds. We find that ICW firms are more likely than non-ICW firms to use equity issue proceeds to finance investments. After disclosure, ICW and nonICW firms exhibit similar preferences in using proceeds, suggesting that ICW firms take on more equity with the motive of financing investment and that disclosure ends this practice. Our overall evidence indicates that the ICW disclosure substantially alters corporate information environment and managerial incentives, which leads to significant changes in firms’ debt-equity choices.