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Voluntary Internal Control Weakness Disclosures In Initial Public Offerings: Determinants And Subsequent Financial Reporting Quality, Tiffany Jo Westfall

College of Business: Dissertations, Theses, and Student Research

This study examines registrants’ incentives to disclose 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 2005-2013, I find that increasing management’s disclosure credibility, by hiring a new CEO in the IPO, is an incentive to include ICWs in IPO registration statements. I find that management does build credibility with underwriters evidenced by IPO registrants that disclose ICWs voluntarily are associated with higher IPO offer prices. The results suggest that registrants including voluntary ICW disclosures are more likely to receive an adverse SOX 404 …