The impact of the Sarbanes–Oxley Section 404(b) exemption on earnings informativeness
Why this work is in the frame
A frame that forgets how it found something cannot be audited. These are the routes that admitted this work.
Bibliographic record
Abstract
We investigate whether firms who voluntarily drop compliance with Section 404(b) of Sarbanes–Oxley (SOX)—the requirement to have an outside auditor conduct an audit of internal control over financial reporting—suffer a loss of earnings informativeness. Section 404(b) has been widely criticized for imposing costs in excess of the benefits to investors. Calls for wholesale repeal and increasingly wide exemptions from compliance continue to this day. The fact that non‐US regulators have not passed similar regulation outside of the USA appears to be partially driven by similar cost concerns. Our results indicate that voluntary dropping of 404(b) is associated with a drop in earnings informativeness. This result is driven primarily by financially distressed companies. Our results address previous calls for research about the market's perception of 404(b) compliance and suggest that regulators may wish to consider firm characteristics when determining which firms should be required to purchase an audit of internal control over financial reporting.
Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.004 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it