Information Content of Internal Control Weaknesses: The Evidence from Japan

Riku Nishizaki, Yudai Takano, Fumiko Takeda

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


This paper investigates how capital markets in a code-law country, Japan, react to the disclosure of internal control weaknesses (ICW). The Japanese government attempted to implement a more concise, efficient, and, thus, less strict internal control reporting system than Section 404 of the US-SOX. In fact, for the first two years, the disclosure rate of ICW has been much lower in Japan than in the U.S. While market reactions to the disclosure of ICW are not significantly different from zero in our event study analysis, they become significantly negative after controlling for other information released around the disclosure date, audit quality, and other firm attributes. Our results are consistent with the notion that the disclosure of ICW is informative to the market because it is less frequent and exceptional in Japan.

Original languageEnglish
Pages (from-to)1-26
Number of pages26
JournalInternational Journal of Accounting
Issue number1
Publication statusPublished - 2014 Mar
Externally publishedYes


  • Disclosure
  • Event study
  • Institution
  • Internal control
  • Regulation
  • Sarbanes-oxley act

ASJC Scopus subject areas

  • Accounting
  • Finance


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