The Private Securities Litigation Reform Act (PSLRA), Sarbanes Oxley & Large Firm Risk
Nicholas V. Vakkur
October 17, 2010
This study empirically evaluates the impact of the Private Securities Litigation Reform Act of 1995 (PSLRA) and the Sarbanes Oxley Act of 2002 upon the (equity) risk of the largest US firms, the backbone of the US economy. Drawing from the literature, hypotheses are developed and empirically evaluated using an extensive data set: daily return data between 1993 and 2009 from a representative sample of the largest European and US firms. This represents one of the first studies to evaluate the risk implications of the PSLRA, while research on Sarbanes Oxley has produced inconclusive — at times contradictory — findings. Strong evidence is provided that the PSLRA had no significant risk impact, and that Sarbanes Oxley significantly reduced firm risk — measured as mean equity variance. Findings also suggest that Sarbanes Oxley’s risk impairment effect may be enhanced for the largest 2.5% of US firms.
Number of Pages in PDF File: 28
Keywords: Sarbanes Oxley, Accounting, accounting regulation, corporate governance, firm risk, PSLRA, large firms
JEL Classification: C10, C12, C20, C33, C50, D78, D81, G10, G18, G30, G38, K20, K22, I21, l50, l51, M20, M40, N20working papers series
Date posted: April 5, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.532 seconds