Stock market reaction to financial statement certification by bank holding company CEOs
AbstractIn 2002, the Securities and Exchange Commission mandated that the chief executive officers of large, publicly traded firms certify the accuracy of their company financial statements. In this paper, I investigate whether CEO certification has had a measurable effect on the stock market valuation of the forty-two bank holding companies subject to the SEC order. I find that these firms experienced a positive average abnormal return of 30 to 60 basis points on the day of certification-a result driven primarily by those BHCs that certified ahead of the SEC's deadline. Characteristics associated with greater opaqueness-BHC asset size, liquid asset holdings, and the extent of "risky" and information-intensive lending-are systematically associated with these certification day abnormal returns. In addition, average returns for not-yet-certifying BHCs were positive, though not statistically significant, on the first two certified, lending weak support to idea that early by some may have signaled investors other likely certify. Overall, results suggest requirement provided relevant information was thus an effective public policy tool, at least banking sector.
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.
Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 170.
Date of creation: 2003
Date of revision:
Other versions of this item:
- Hirtle, Beverly, 2006. "Stock Market Reaction to Financial Statement Certification by Bank Holding Company CEOs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1263-1291, August.
- NEP-ALL-2004-09-05 (All new papers)
- NEP-BEC-2004-09-05 (Business Economics)
- NEP-FIN-2004-09-05 (Finance)
- NEP-FMK-2004-09-05 (Financial Markets)
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.:
- Bhattacharya, Utpal & Groznik, Peter & Haslem, Bruce, 2007. "Is CEO certification of earnings numbers value-relevant?," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 611-635, December.
- Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
- Flannery, Mark J. & Kwan, Simon H. & Nimalendran, Mahendrarajah, 2013. "The 2007–2009 financial crisis and bank opaqueness," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 55-84.
- Guo Li & Lee Sanning & Sherrill Shaffer, 2009. "Statistical Opacity In The U.S. Banking Industry," CAMA Working Papers 2009-16, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Bannier, Christina E. & Behr, Patrick & Güttler, André, 2009.
"Rating opaque borrowers: why are unsolicited ratings lower?,"
Frankfurt School - Working Paper Series
133, Frankfurt School of Finance and Management.
- Christina E. Bannier & Patrick Behr & Andre Güttler, 2010. "Rating opaque borrowers: why are unsolicited ratings lower?," Review of Finance, European Finance Association, vol. 14(2), pages 263-294.
- Tri Vi Dang & Gary Gorton & Bengt Holmström & Guillermo Ordonez, 2014.
"Banks as Secret Keepers,"
NBER Working Papers
20255, National Bureau of Economic Research, Inc.
- Giuliano Iannotta & Simon Kwan, 2013. "Effects of earnings management and delays in loss recognition on bank opacity," Working Paper Series 2013-35, Federal Reserve Bank of San Francisco.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If references are entirely missing, you can add them using this form.