Shareholder Wealth Effects of Corporate Governance Deficiencies on Nasdaq

46 Pages Posted: 29 Oct 2014 Last revised: 28 Mar 2017

See all articles by Carol Ann Frost

Carol Ann Frost

University of North Texas

Joshua C. Racca

University of Connecticut - Department of Accounting

Mary Harris Stanford

Texas Christian University - Department of Accounting

Date Written: March 27, 2017

Abstract

The Nasdaq Stock Market’s enforcement activities offer a unique setting for investigating the consequences of changes in corporate governance as evidenced by deficiency notices. We document significant negative abnormal returns in response to Nasdaq deficiency notices for audit committee and management review and certification requirements. Our evidence suggests that market participants view Nasdaq listing requirements as minimum corporate governance standards and with declines in governance negatively impacting expectations of future cash flows or risk. Our evidence also sheds light on concerns about U.S. exchanges self-regulatory practices regarding investor protection and the value of securities laws and enforcement.

Keywords: Corporate governance, listing rule deficiencies, audit committee, independent directors, stock exchange regulation

JEL Classification: M14, M41, G34

Suggested Citation

Frost, Carol Ann and Racca, Joshua C. and Stanford, Mary, Shareholder Wealth Effects of Corporate Governance Deficiencies on Nasdaq (March 27, 2017). Available at SSRN: https://ssrn.com/abstract=2515595 or http://dx.doi.org/10.2139/ssrn.2515595

Carol Ann Frost

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States
(940) 565- 3069 (Phone)
(940) 565-3803 (Fax)

Joshua C. Racca (Contact Author)

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

Mary Stanford

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817-257-7483 (Phone)

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