The role of corporate governance during the pre- and post-Sarbanes Oxley periods
by Anthony C. Ng, Yaw M. Mensah
International Journal of Corporate Governance (IJCG), Vol. 2, No. 1, 2010

Abstract: This study examines the joint effects of the passing of Sarbanes-Oxley Act (SOX) of 2002 and firm-specific corporate governance mechanisms on the value-relevance of earnings. We find that value-relevance of earnings is significantly different for different sub-periods. We find that good corporate governance (proxied by lack of anti-takeover provisions) has a positive impact on the value-relevance of earnings only during the scandal (SCA) period. These results hold after controlling for changes in institutional ownership and earnings quality (EQ). Our results suggest that there is a substitution effect between good firm-specific corporate governance mechanisms and the strictness of the regulatory environment.

Online publication date: Thu, 16-Sep-2010

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