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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
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    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.

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    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 19 (2009)
    Issue (Month): 3 (July)
    Pages: 193-205

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    Handle: RePEc:eee:mulfin:v:19:y:2009:i:3:p:193-205
    Contact details of provider: Web page: http://www.elsevier.com/locate/mulfin

    Keywords: Sarbanes-Oxley Risk effects Foreign firms;

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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.

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