We thank Bill Christie (the editor) and an anonymous reviewer for their insightful comments and gratefully acknowledge financial support from the Moyer endowment at the University of Akron and the Theis endowment at St. John's University.
Information Asymmetry Determinants of Sarbanes-Oxley Wealth Effects
Article first published online: 16 SEP 2010
© 2010 Financial Management Association International
Volume 39, Issue 3, pages 1253–1272, Autumn 2010
How to Cite
Akhigbe, A., Martin, A. D. and Newman, M. L. (2010), Information Asymmetry Determinants of Sarbanes-Oxley Wealth Effects. Financial Management, 39: 1253–1272. doi: 10.1111/j.1755-053X.2010.01111.x
- Issue published online: 16 SEP 2010
- Article first published online: 16 SEP 2010
We investigate the roles of information asymmetry and governance in the wealth effects associated with passage of the Sarbanes-Oxley Act (SOX) for a sample of 1,158 firms. For events suggesting adoption of stringent reform legislation, we find more (less) favorable abnormal returns (ARs) for firms with high (low) information asymmetry and for firms with weak (strong) governance. More favorable effects could result from expected improvements for firms with high information asymmetry or weak governance. Firms with positive ARs experience information asymmetry reductions post-SOX, indicating the market was able to discern the firms that would most benefit from the legislation's passage.