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Changes in risk of foreign firms listed in the U.S. following Sarbanes-Oxley

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  • Akhigbe, Aigbe
  • Martin, Anna D.
  • Nishikawa, Takeshi

Abstract

This study investigates the changes in the riskiness of foreign firms listed in the U.S. following the passage of the Sarbanes-Oxley Act (SOX), legislation aimed at calming investor fears. While capital market measures of risk increase on average over a shorter-term period, total and unsystematic risk measures decrease on average over a longer-term period. Finding longer-term decreases in these risk measures is consistent with reductions in investor uncertainty. Further cross-sectional analyses show that foreign firms considered to be less uncertain at the time of SOX passage received the greatest risk reductions in the post-SOX period. Thus, it appears that the less uncertain foreign firms especially benefited from the heightened awareness and investor focus that occurred in conjunction with the passage of SOX.

Suggested Citation

  • Akhigbe, Aigbe & Martin, Anna D. & Nishikawa, Takeshi, 2009. "Changes in risk of foreign firms listed in the U.S. following Sarbanes-Oxley," Journal of Multinational Financial Management, Elsevier, vol. 19(3), pages 193-205, July.
    • Handle: RePEc:eee:mulfin:v:19:y:2009:i:3:p:193-205
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    Cited by:

    1. Daugherty, Mary & Georgieva, Dobrina, 2011. "Foreign cultures, Sarbanes-Oxley Act and cross-delisting," Journal of Multinational Financial Management, Elsevier, vol. 21(4), pages 208-223, October.
    2. Haggard, K. Stephen & Zhang, Ying Jenny, 2010. "Foreign issuers in the U.S. PIPE market," Journal of Multinational Financial Management, Elsevier, vol. 20(2-3), pages 144-157, July.
    3. Jackson, Gregory, 2010. "Understanding corporate governance in the United States: An historical and theoretical reassessment," Arbeitspapiere 223, Hans-Böckler-Stiftung, Düsseldorf.

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