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Influence of disclosure and governance on risk of US financial services firms following Sarbanes-Oxley

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  • Akhigbe, Aigbe
  • Martin, Anna D.

Abstract

This study finds significant changes in capital market measures of risk following the passage of Sarbanes-Oxley for US financial services firms. Shorter-term measures of risk shifts are positive, on average, and consistent with the mandatory nature of the disclosure and governance provisions. Longer-term total and unsystematic risk shifts are negative, on average, and consistent with reductions in investor uncertainty as transparency improved. We find that the changes in shorter-term and longer-term risk measures vary inversely with the strength of disclosure and governance characteristics. The financial market rewarded (punished) firms with stronger (weaker) disclosure and stronger (weaker) governance.

Suggested Citation

  • Akhigbe, Aigbe & Martin, Anna D., 2008. "Influence of disclosure and governance on risk of US financial services firms following Sarbanes-Oxley," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2124-2135, October.
    • Handle: RePEc:eee:jbfina:v:32:y:2008:i:10:p:2124-2135
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