To Swear Early or Not to Swear Early? An Empirical Investigation of Factors Affecting CEOS' Decisions *

Abstract

On June 27, 2002, the SEC ordered the CEOs and CFOs of public companies with revenues during their last fiscal year of greater than $1.2 billion to file written statements, under oath, regarding the accuracy of their companies' financial statements. The SEC's order required the sworn statements to be filed with each company's next periodic disclosure report to the SEC due on or after August 14, depending on the company's fiscal year-end. Many companies elected to file sworn statements prior to the specific filing deadlines for their companies. We examine the characteristics and incentives of companies that certified their financial reports prior to the deadline set by the SEC. Using regression analysis, logit analysis, and the Cox proportional hazards model, we find that larger firms, firms with higher earnings quality (measured as firms with lower current discretionary accruals or total discretionary accruals), and firms with higher levels of institutional holdings filed sworn statements early. These results are consistent with our theoretical predictions and contribute to our understanding of factors affecting firms' responses to regulatory requirements.

Keywords: CEO swear, firm size, earnings quality, institional holdings

JEL Classification: M41