An Examination of the Determinants and Contents of Corporate Voluntary Disclosure of Management's Responsibilities for Financial Reporting

The Sarbanes-Oxley Act (SOX) of 2002 requires principal officers to certify under oath to the veracity of information contained in Securities and Exchange Commission (SEC) filings and opine on the effectiveness of the internal control system. This study examines the determinants and contents of corporate voluntary disclosure of management's responsibilities during the five-year period preceding the SOX Act. We predict that the voluntary disclosure of management's responsibilities for financial information signals certain incentives and characteristics of the reporting firm that are relevant to financial statement users and regulators. Consistent with our predictions, our findings reveal significant differences between issuing and nonissuing firms as to the effectiveness of the firm's internal control system, access to capital markets, audit committee characteristics, and ownership structure. An empirical analysis of the contents of these assertions also reveals different areas of emphasis and selectivity by management, which represents an informative link to existing disclosure mandates. The results of this study contribute to our knowledge of management's motivations for voluntary disclosure and lend credence to the mandatory certification requirements and related disclosure reforms established in the post-Enron era.