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

Journal of Business Ethics, Forthcoming

59 Pages Posted: 8 Aug 2015 Last revised: 12 Oct 2022

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Lars Helge Hass

Lancaster University - Lancaster University Management School; University of Iowa - Henry B. Tippie College of Business

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management

Monika Tarsalewska

University of Exeter Business School

Date Written: sep 27, 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.

Keywords: Management Disclosure, Material Weaknesses, Disclosure Controls and Procedures, Venture Capital, Initial Public Offerings, Sarbanes-Oxley Act of 2002, Corporate Governance

JEL Classification: D01, G24, G34, K4

Suggested Citation

Cumming, Douglas J. and Hass, Lars Helge and Hass, Lars Helge and Myers, Linda A. and Tarsalewska, Monika, Does Venture Capital Backing Improve Disclosure Controls and Procedures? Evidence from Management’s Post-IPO Disclosures (sep 27, 2022). Journal of Business Ethics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2640873 or http://dx.doi.org/10.2139/ssrn.2640873

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Lars Helge Hass

Lancaster University - Lancaster University Management School ( email )

Department of Accounting and Finance
Lancaster, LA1 4YX
United Kingdom

University of Iowa - Henry B. Tippie College of Business ( email )

Dept. of Accounting
Iowa City, IA 52242-1000
United States

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management ( email )

Knoxville, TN
United States

Monika Tarsalewska (Contact Author)

University of Exeter Business School ( email )

Streatham Court, Streatham Campus,
Rennes Drive
Exeter, Devon EX4 4PU
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
406
Abstract Views
2,460
rank
106,680
PlumX Metrics