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Information Asymmetry Determinants of Sarbanes-Oxley Wealth Effects

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  • Aigbe Akhigbe
  • Anna D. Martin
  • Melinda L. Newman

Abstract

"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." Copyright (c) 2010 Financial Management Association International.

Suggested Citation

  • Aigbe Akhigbe & Anna D. Martin & Melinda L. Newman, 2010. "Information Asymmetry Determinants of Sarbanes-Oxley Wealth Effects," Financial Management, Financial Management Association International, vol. 39(3), pages 1253-1272, September.
  • Handle: RePEc:bla:finmgt:v:39:y:2010:i:3:p:1253-1272
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    Cited by:

    1. Shen, Carl Hsin-han, 2014. "Pecking order, access to public debt market, and information asymmetry," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 291-306.

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