臺大管理論叢 NTU Management Review VOL.30 NO.2

The Benefits of Disclosing Internal Control Weaknesses: Evidence from Taiwanese Banks 202 company-level ICW disclosures under SOX 404 (e.g., Bedard and Graham, 2011). However, regulators in Taiwan do not require banks to perform such classifications; hence, in practice, banks do not classify their ICW disclosures, thus conducting the analysis is infeasible. Third, this study acknowledges that the short-term market reaction specification may provide some further evidence on the role of ICW reporting. However, due to the data limitation, i.e., very few observations in the sample have changed their quality of identifying and reporting ICW, conducting a short-term market reaction test that would yield reliable empirical findings is not possible. Hence, it is expected that researchers who are interested in this research question may provide more evidence in the future when the data limitation is not an issue. Fourth, this study also acknowledges that the effect of ICW disclosures on firm value might be indirect. In other words, ICW disclosures might be related to the cost of capital, earnings management, auditing quality, or governance. Thus, ICW disclosures affect firm value. Although a significantly positive association between ICW and firm value is documented, future studies should consider examining how ICW disclosure relates to the cost of capital, earnings management, auditing quality, or governance.