Corporate Governance and Firm Value: the Impact of the 2002 Governance Rules

59 Pages Posted: 24 Oct 2005  

Vidhi Chhaochharia

University of Miami

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah

Date Written: March 2007

Abstract

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.

Keywords: Governance, Sarbanes Oxley, Exchange Rules

JEL Classification: G34, G38

Suggested Citation

Chhaochharia, Vidhi and Grinstein, Yaniv, Corporate Governance and Firm Value: the Impact of the 2002 Governance Rules (March 2007). Johnson School Research Paper Series No. 23-06; AFA 2006 Boston Meetings Paper. Available at SSRN: https://ssrn.com/abstract=556990 or http://dx.doi.org/10.2139/ssrn.556990

Vidhi Chhaochharia

University of Miami ( email )

514 Jenkins Building
Miami, FL 33124
United States

Yaniv Grinstein (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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