Corporate Governance and Firm Value: the Impact of the 2002 Governance Rules
University of Miami
Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah
Johnson School Research Paper Series No. 23-06
AFA 2006 Boston Meetings Paper
The 2001 to 2002 corporate scandals led to the Sarbanes Oxley Act and to various amendments to the U.S. stock exchanges' regulations. We find that the announcement of these rules has a significant effect on firm value. Firms that are less compliant with the provisions of the rules earn positive abnormal returns compared to firms that are more compliant. We also find variation in the response across firm size. Large firms that are less compliant earn positive abnormal returns but small firms that are less compliant earn negative abnormal returns, suggesting that some provisions are detrimental to small firms.
Number of Pages in PDF File: 59
Keywords: Governance, Sarbanes Oxley, Exchange Rules
JEL Classification: G34, G38
Date posted: October 24, 2005
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