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Risk Shifts Following Sarbanes-Oxley: Influences of Disclosure and Governance


  • Aigbe Akhigbe
  • Anna D. Martin
  • Melinda Newman


The Sarbanes-Oxley Act of 2002 (SOX) aimed to improve financial reporting by enhancing corporate disclosure and governance. We find statistically significant increases, from before to after the passage of SOX, in total return variance, market risk and idiosyncratic risk. The risk increases are consistent with predictions that the legislation would cause firms to disclose more negative information, resulting in increased investment risk. However, in cross-sectional tests, post-SOX improvements in information certainty, board independence and monitoring are associated with smaller increases or greater decreases in risk. If SOX is responsible for these improvements, its effects are consistent with its purpose. Copyright (c) 2008, The Eastern Finance Association.

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  • Aigbe Akhigbe & Anna D. Martin & Melinda Newman, 2008. "Risk Shifts Following Sarbanes-Oxley: Influences of Disclosure and Governance," The Financial Review, Eastern Finance Association, vol. 43(3), pages 383-401, August.
  • Handle: RePEc:bla:finrev:v:43:y:2008:i:3:p:383-401

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    References listed on IDEAS

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    Cited by:

    1. Budsaratragoon Pornanong & Hillier David & Lhaopadchan Suntharee, 2014. "Does Corporate Governance Improve Transparency in Emerging Markets?," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 87-104, July.
    2. Waters, James, 2013. "The Sarbanes-Oxley Act, industrial innovation, and real option creation," MPRA Paper 49173, University Library of Munich, Germany.
    3. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.
    4. repec:kap:jmgtgv:v:21:y:2017:i:4:d:10.1007_s10997-016-9361-5 is not listed on IDEAS

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