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Does Venture Capital Backing Improve Disclosure Controls and Procedures? Evidence from Management’s Post‑IPO Disclosures

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Date Issued:
2022
Abstract:
Firm managers make ethical decisions regarding the form and quality of disclosure. Disclosure can have long-term implications for performance, earnings manipulation, and even fraud. We investigate the impact of venture capital (VC) backing on the quality and informativeness of disclosure controls and procedures for newly public companies. We find that these controls and procedures are stronger, as evidenced by fewer material weaknesses in internal control under Section 302 of the Sarbanes–Oxley Act, when companies are VC-backed. Moreover, these disclosures are informative and are more likely to be followed by subsequent financial statement restatements than are disclosures made by non-VC-backed IPO companies.
Title: Does Venture Capital Backing Improve Disclosure Controls and Procedures? Evidence from Management’s Post‑IPO Disclosures.
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Name(s): Douglas Cumming
Lars Helge Hass
Linda A. Myers
Monika Tarsalewska
Type of Resource: text
Genre: Article
Date Issued: 2022
Publisher: Springer
Physical Form: pdf
Extent: 25 p.
Language(s): English
Abstract: Firm managers make ethical decisions regarding the form and quality of disclosure. Disclosure can have long-term implications for performance, earnings manipulation, and even fraud. We investigate the impact of venture capital (VC) backing on the quality and informativeness of disclosure controls and procedures for newly public companies. We find that these controls and procedures are stronger, as evidenced by fewer material weaknesses in internal control under Section 302 of the Sarbanes–Oxley Act, when companies are VC-backed. Moreover, these disclosures are informative and are more likely to be followed by subsequent financial statement restatements than are disclosures made by non-VC-backed IPO companies.
Identifier: FAUIR000523 (IID)
Persistent Link to This Record: http://purl.flvc.org/fau/fd/FAUIR000523
Host Institution: FAU

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