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Executives Swearing by Their Numbers Restores Confidence

CEOs CFOs Swearing by Their Numbers Boosts Public Confidence, UCR Research Says

Sarbanes Oxley requirements renews the public’s confidence in the accuracy
of corporate accounting, paper shows.

(March 17, 2006)


Birendra "Barry" Mishra

RIVERSIDE, Calif. — — In the wake of accounting scandals at firms such as Enron, WorldCom and Tyco, the public’s confidence in corporate America took a nose dive.

The resulting stock losses could have had a devastating impact on the economic development of the country because consumer and investor confidence in capital markets and in the integrity of corporate America are critical to economic growth.

The situation prompted federal regulators to make top executives swear by the accuracy of their numbers of face stiff criminal penalties. Has it worked?

According to a UC Riverside paper in the journal The Accounting Review titled CEO’s/CFO’s Swearing by the Numbers: Does it Impact Share Price of Firm? the answer appears to be yes. Authors Birendra "Barry" Mishra, Hsihui Chang and Woody Liao, accounting professors at the A. Gary Anderson Graduate School of Management and Jengfang Chen professor at National Dong Hwa University showed in the journal’s January 2006 edition that the certification of financial statements as required by the Security and Exchange Commission has restored public confidence as reflected by rising corporate share prices.

The paper’s findings offer strong support for keeping certification an integral part Sarbanes-Oxley Act of 2002.

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