Equity Value Implications of the Sec Exchange Act Rule 13a-14: A Litigation Cost Perspective

Posted: 5 May 2012

See all articles by Mukesh Garg

Mukesh Garg

Independent

Vic Naiker

University of Melbourne - Faculty of Business and Economics

Farshid Navissi

Monash University

Date Written: April 4, 2012

Abstract

The purpose of our study is to assess the role of litigation risk in the stock price setting process in relation to the Securities and Exchange Commission (SEC) Exchange Act Rule 13a-14. We employ 12 June, the proposal of Rule 13a-14, and 27 June, the ruling of certification requirement, as event dates, and investigate litigation cost implications of the SEC proposal and ruling. We focus on firms in industries that are highly exposed to class action lawsuits and find negative abnormal returns surrounding 12 June, and positive abnormal returns surrounding 27 June, for firms relieved from compliance requirements. The results are more profound for firms in high-litigation-risk industries.

Keywords: CEO and CFO certification, financial reports, litigation, abnormal returns

Suggested Citation

Garg, Mukesh and Naiker, Vic and Navissi, Farshid, Equity Value Implications of the Sec Exchange Act Rule 13a-14: A Litigation Cost Perspective (April 4, 2012). Australian Journal of Management, Vol. 37, No. 1, 2012, Available at SSRN: https://ssrn.com/abstract=2050449

Mukesh Garg

Independent ( email )

Vic Naiker

University of Melbourne - Faculty of Business and Economics ( email )

198 Berkeley Street
Melbourne, Victoria, 3010
Australia

Farshid Navissi (Contact Author)

Monash University ( email )

Building H, Caulfield Campus
Melbourne, Victoria 3142 Vic 3145
Australia
+61 405 664941 (Phone)

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