The Sarbanes-Oxley Act and CEO tenure, turnover, and risk aversion
AbstractUsing a sample of CEO turnover from 1999 to 2005, we find that CEOs become significantly more risk averse following the passage of the Sarbanes-Oxley Act, SOX. Their increased risk aversion may serve as an explanation for why CEO tenure is not significantly shortened and forced CEO turnover is not more likely post-SOX, as we document in this paper. In addition, we provide evidence that financial restatements have some effects on CEO tenure and the probability of forced CEO turnover. This may be due to intensified monitoring activities by the board and the financial press in the post-SOX era, but we cannot contribute all of it to SOX. In some occasions, SOX seems to weaken the effect of board monitoring on CEO tenure and the effect of firm performance on CEO risk aversion. Though the increased monitoring level post-SOX contribute to the increased CEO risk aversion, little impact is found from the SOX-mandated accuracy and transparency of financial reporting.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal The Quarterly Review of Economics and Finance.
Volume (Year): 50 (2010)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620167
The Sarbanes-Oxley Act CEO turnover CEO tenure Risk aversion Financial reporting Intensified monitoring;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sanjeev Bhojraj & Partha Sengupta, 2003. "Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors," The Journal of Business, University of Chicago Press, vol. 76(3), pages 455-476, July.
- Kahle, Kathleen M. & Shastri, Kuldeep, 2004. "Executive Loans," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(04), pages 791-811, December.
- Agrawal, Anup & Jaffe, Jeffrey F & Karpoff, Jonathan M, 1999. "Management Turnover and Governance Changes following the Revelation of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 309-42, April.
- Jay Dahya & John J. McConnell & Nickolaos G. Travlos, 2002. "The Cadbury Committee, Corporate Performance, and Top Management Turnover," Journal of Finance, American Finance Association, vol. 57(1), pages 461-483, 02.
- Ryan Davidson & Jenny Goodwin-Stewart & Pamela Kent, 2005. "Internal governance structures and earnings management," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(2), pages 241-267.
- Bebchuk, Lucian A. & Cohen, Alma, 2005.
"The costs of entrenched boards,"
Journal of Financial Economics,
Elsevier, vol. 78(2), pages 409-433, November.
- Lucian Bebchuk, . "The Costs of Entrenched Boards," American Law & Economics Association Annual Meetings 1091, American Law & Economics Association.
- Lucian Bebchuk & Alma Cohen, 2004. "The Costs of Entrenched Boards," NBER Working Papers 10587, National Bureau of Economic Research, Inc.
- Suraj Srinivasan, 2005. "Consequences of Financial Reporting Failure for Outside Directors: Evidence from Accounting Restatements and Audit Committee Members," Journal of Accounting Research, Wiley Blackwell, vol. 43(2), pages 291-334, 05.
- Elsaid, Eahab & Davidson III, Wallace N., 2009. "What happens to CEO compensation following turnover and succession?," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 424-447, May.
- James S. Linck & Jeffry M. Netter & Tina Yang, 2009. "The Effects and Unintended Consequences of the Sarbanes-Oxley Act on the Supply and Demand for Directors," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3287-3328, August.
- Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
- Huson, Mark R. & Malatesta, Paul H. & Parrino, Robert, 2004. "Managerial succession and firm performance," Journal of Financial Economics, Elsevier, vol. 74(2), pages 237-275, November.
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
- Farrell, Kathleen A. & Whidbee, David A., 2003. "Impact of firm performance expectations on CEO turnover and replacement decisions," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 165-196, December.
- Cornett, Marcia Millon & Marcus, Alan J. & Tehranian, Hassan, 2008. "Corporate governance and pay-for-performance: The impact of earnings management," Journal of Financial Economics, Elsevier, vol. 87(2), pages 357-373, February.
- Vidhi Chhaochharia & Yaniv Grinstein, 2007. "Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules," Journal of Finance, American Finance Association, vol. 62(4), pages 1789-1825, 08.
- Farrell, Kathleen A. & Whidbee, David A., 2002. "Monitoring by the financial press and forced CEO turnover," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2249-2276.
- Xie, Biao & Davidson, Wallace III & DaDalt, Peter J., 2003. "Earnings management and corporate governance: the role of the board and the audit committee," Journal of Corporate Finance, Elsevier, vol. 9(3), pages 295-316, June.
- Fich, Eliezer M. & Shivdasani, Anil, 2007. "Financial fraud, director reputation, and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 86(2), pages 306-336, November.
- Karpoff, Jonathan M & Lott, John R, Jr, 1993. "The Reputational Penalty Firms Bear from Committing Criminal Fraud," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 757-802, October.
- Baysinger, Barry D & Butler, Henry N, 1985. "Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 101-24, Spring.
- Joe, Jennifer R. & Louis, Henock & Robinson, Dahlia, 2009. "Managers’ and Investors’ Responses to Media Exposure of Board Ineffectiveness," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(03), pages 579-605, June.
- Cullinan, Charles P. & Du, Hui & Wright, Gail B., 2006. "A test of the loan prohibition of the Sarbanes-Oxley Act: Are firms that grant loans to executives more likely to misstate their financial results?," Journal of Accounting and Public Policy, Elsevier, vol. 25(4), pages 485-497.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.