Information asymmetry, disclosure and foreign institutional investment: An empirical investigation of the impact of the Sarbanes-Oxley Act

Abdioğlu, Nida; Bamiatzi, Vassiliki; Çavuşgil, S. Tamer; Khurshed, Arif; Stathopoulos, Konstantinos

doi:10.1016/j.ibusrev.2015.04.001

Cited by 19 publications

(13 citation statements)

References 79 publications

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“…In this case, involving in good CG can improve efficiency by gaining access to the critical resources (Pfeffer & Salancik, 1978). Additionally, committing to good CG practices can improve efficiency by reducing the agency/information asymmetry problems (Abdioglu et al, 2015;Jensen & Meckling, 1976).…”

Section: A Neo-institutional Theoretical Perspective and Cg Disclosurmentioning

confidence: 99%

Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

2016

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This study investigates the level of compliance with, and disclosure of, good corporate governance (CG) practices among UK publicly listed firms, and consequently ascertains whether board characteristics and ownership structure variables can explain observable differences in the extent of voluntary CG compliance and disclosure practices. Design/Methodology/Approach: The study uses one of the largest datasets to-date on compliance and disclosure of CG practices from 2008 to 2013 containing 120 CG provisions drawn from the 2010 UK Combined Code relating to 100 UK listed firms to conduct multiple regression analyses of the determinants of voluntary CG disclosures. A number of additional estimations, including two stage least squares, fixed-effects and lagged structures, are conducted in order to test the robustness of the findings. Findings: The results suggest that there is a substantial variation in the levels of compliance with, and disclosure of, good CG practices among the sampled UK firms. We also find that firms with larger board size, more independent outside directors and greater director diversity tend to disclose more CG information voluntarily, whereas the level of voluntary CG compliance and disclosure is insignificantly related to the existence of a separate CG committee and institutional ownership. Additionally, the results indicate that block ownership and managerial ownership impact negatively on voluntary CG compliance and disclosure practices. The findings are fairly robust across a number of econometric models that sufficiently address various endogeneity problems and alternative CG indices. Overall, the findings are generally consistent with the predictions of neo-institutional theory. Originality/Value: This paper extends, as well as contributes to the extant CG literature by offering new evidence on compliance with, and disclosure of, good CG recommendations contained in the 2010 UK Combined Code following the 2007/08 global financial crisis. This paper also advances the existing literature by offering new insights from a neo-institutional theoretical perspective of the impact of board and ownership mechanisms on voluntary CG compliance and disclosure practices.

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Section: A Neo-institutional Theoretical Perspective and Cg Disclosurmentioning

confidence: 99%

Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

2016

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“…One such impediment is a perception that shareholders in the emerging markets are left relatively unprotected by lax corporate governance standards (Gibson, 2003;Klapper and Love, 2004). To overcome this perception, firms based in the emerging markets pursuing global capital may elect to ''migrate'' toward exchanges with more stringent governance standards than their home market, thereby ''bonding'' their commitment to such standards (Abdioglu et al, 2015;Coffee, 1999Coffee, , 2002Stulz, 1999). This suggests that the relatively rigorous governance standards of US exchanges may add to the attractiveness of cross-listing through an ADR.…”

Section: Introductionmentioning

confidence: 99%

Reducing risk in the emerging markets: Does enhancing corporate governance work?

Sayari

Marcum

2018

BRQ Business Research Quarterly

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This study examines emerging market firms that adopt corporate governance standards similar to those in the US. The investigation highlights the impact governance standards may have on corporate risk taking, as measured by stock return volatility, under varying political and socioeconomic regimes. In a cross-sectional time-series setting, the analysis reveals that enhanced governance standards are associated with risk reductions among US domiciled firms, cross-listed American Depository Receipt companies (ADRs) and non-cross listed emerging market (EM) firms. The effect of these governance standards on risk taking, however, does not deviate considerably between cross-listed ADRs that are exposed to Securities and Exchange Commission (SEC) mandated regulations and non-cross-listed EM firms that are not subject to the same regulatory constraints. Also, in some respects, Chinese firms seem to exhibit corporate behavior that is contrary to that of the rest of the world.

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“…and firm performance. From an international perspective, Abdioglu et al (2015) show that the improvement of the quality of corporate disclosures and the decrease in the information asymmetry after the passage of SOX 2002 lead to the increase in the foreign international investment.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

An exploratory study of US acquirers’ market performance: pre- versus post-Sarbanes–Oxley act of 2002

Hajjar

Menassa

Kassamany

2021

JFRA

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Purpose Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to investigate how this change varies with the methods of payment used for the deals. Design/methodology/approach Deductive in nature and using an event study approach, this paper uses a sample of 675 deals between 1999 and 2006 to test three research hypotheses in a pre-post setting. Findings Results show that at the aggregate level, there is a significant improvement in the market performance of US acquirers around the announcement day in the aftermath of the passage of SOX 2002. Considered separately, both US stock acquirers and cash acquirers did not experience any significant improvement in market performance in the post-Sarbanes–Oxley period. These results are robust to controlling for governance, firm and deal variables, as well as industry and year fixed effects. Research limitations/implications Exploratory in nature, the results are to be interpreted in light of the sample size and the period under investigation. Practical implications The results provide evidence for regulators and legislators on the contribution of SOX 2002 to curbing managerial misconduct. Significant improvement in the market performance also signals more confidence in managerial decisions and a reduction in agency problems. The insignificant change in stock acquirersâ€™ market performance can be an indication that policymakers should exert more efforts to improve shareholders' confidence in the quality of disclosure. Originality/value This investigation provides unique insights on whether SOX has been effective in mitigating mispricing concerns associated with stock-financed acquisitions and whether it was effective in moderating the governance mechanism associated with cash-financed acquisitions.

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Information asymmetry, disclosure and foreign institutional investment: An empirical investigation of the impact of the Sarbanes-Oxley Act

Cited by 19 publications

References 79 publications

Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

Reducing risk in the emerging markets: Does enhancing corporate governance work?

An exploratory study of US acquirers’ market performance: pre- versus post-Sarbanes–Oxley act of 2002

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