Do SOX-Related Changes in Corporate Governance Practices Affect Stock Returns?
23 Pages Posted: 24 Mar 2008
Date Written: March 18, 2008
Abstract
Governance characteristics from the years 2003 and 2005 were used to investigate the extent to which firms have had to change their governance practices because of the Sarbanes-Oxley legislation and related, contemporary regulations imposed by the Securities and Exchange Commission. The data confirms that firms changed a large number of governance practices in this time period, for SOX compliance and other reasons. This research finds that larger numbers of governance practice changes are associated with lower total investment returns during 2006, the three year period 2004-2006, and the five year period 2002-2006. These results suggest that even though firms may now be in compliance with new governance requirements, their previous weaknesses are still reflected in total returns.
Keywords: Sarbanes Oxley, returns, governance
Suggested Citation: Suggested Citation
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