Sarbanes-Oxley wealth effects: focus on technology firms |
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Authors: | Aigbe Akhigbe Anna D Martin Melinda Newman |
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Institution: | (1) College of Business Administration, Department of Finance, University of Akron, Akron, OH, USA;(2) Tobin College of Business, Department of Economics and Finance, St. John’s University, Queens, NY, USA |
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Abstract: | We evaluate the shareholder wealth effects surrounding the passage of the Sarbanes-Oxley Act (SOX). While other studies have
also measured wealth effects, none has separately examined technology firms. We discuss the unique characteristics of technology
firms and assess whether technology firms are differentially affected. Our results show the portfolio of 218 technology firms
experienced significantly more favorable wealth effects than the portfolio of 940 non-technology firms in response to events
indicating stringent reform legislation. The cross-sectional analyses suggest that board independence, growth expectations,
and R&D expenditures are influential factors in the differential stock price response of technology firms. Across our full
sample of 1,158 firms, we find that wealth effects are less favorable for firms that likely will incur high compliance costs
and more favorable for firms that are expected to benefit from improved governance and improved transparency. |
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