Purpose: The purpose is to examine the determinants of internal control weakness remediation revealed under Sarbanes-Oxley Section 404 reporting requirements.

Design/methodology/approach: We collected data on firms that reported internal control weaknesses for fiscal year 2004, and determined whether these weaknesses still existed in their 2005 filings.  We then used logistic regression to examine the impact of corporate governance, resource, impediments (e.g., severity of weakness) and Big 4 auditor status on remediation completion.

Findings: Resources (e.g., size, ROA) were positively associated with remediation.  Use of Big 4 auditor, more audit committee meetings, more business segments,  and filing lag were negatively associated with remediation, as were number and type of internal control weaknesses.

Research implications/limitations: First, our study sheds light on the individual firm factors that influence corporate response to the legal and social (e.g., public pressure) environment facing firms.  Understanding this should better enable policy makers and regulators to foresee where potential lags in firm implementation of regulations may occur, and why.  Second, we believe that our study also sheds light on the relative value of different corporate governance structures in meeting investor concerns for proper stewardship of their investments.  Finally, our study provides information of use to other corporate governance researchers in that our results suggest the overwhelming importance of the legal and social environment in influencing corporate behavior.  However, the study does not address the contribution of national culture, financial and audit-related reporting requirements, and differences in firm resources, to corporate behavior.