Ideally, firms should discontinue projects that become unprofitable. Managers, however, continue to operate such projects because of their limited employment horizons and empire-building motivations (Jensen, 1986; Ball, 2001). Prior studies suggest that timely loss recognition in accounting earnings...

We investigate whether auditor verification of internal controls over financial reporting (i.e., ICFR verification) affects a firm’s likelihood of voluntary disclosure and investor’s perception of firm’s voluntary disclosure decisions. We exploit a recent amendment to Smaller Reporting...