TAILIEUCHUNG - Firm risk and proxy fights: Evidence from SOX

The Sarbanes Oxley Act of 2002 (SOX) is documented to curb executive risk-taking and firm risk. Utilizing SOX as an exogenous shock on firm risk, we find that proxy fight threats are positively related to a firm’s total risk and idiosyncratic risk. Specifically, although firm risk generally decreases post-SOX, high proxy fight threats mitigate this change in firm risk. | http Accounting and Finance Research Vol. 7 No. 2 2018 Firm Risk and Proxy Fights Evidence from SOX Fang Chen1 Jian Huang2 Han Yu3 1 Assistant Professor of Finance at College of Business University of New Haven West Haven CT 06516 USA 2 Assistant Professor of Finance at College of Business and Economics Towson University Towson MD 21252 USA 3 Assistant Professor of Finance at School of Business Economics and Finance Southern Connecticut State University New Haven CT 06515 USA Correspondence Han Yu Assistant Professor of Finance at School of Business Economics and Finance Southern Connecticut State University New Haven CT 06515 USA Received January 15 2018 Accepted January 30 2018 Online Published February 9 2018 doi URL https Abstract The Sarbanes Oxley Act of 2002 SOX is documented to curb executive risk-taking and firm risk. Utilizing SOX as an exogenous shock on firm risk we find that proxy fight threats are positively related to a firm s total risk and idiosyncratic risk. Specifically although firm risk generally decreases post-SOX high proxy fight threats mitigate this change in firm risk. We also find that although firms adopt more conservative policies such as decreasing their leverage and payout post-SOX these changes are mitigated by proxy fight threats. In sum our findings indicate that proxy fights act as an external disciplinary mechanism encourage executive risk-taking and increase firm risk. Keywords Proxy fight threat Total risk Idiosyncratic risk Sarbanes Oxley Act Quasi-natural experiments JEL Classification Codes C9 G32 G38 M48 1. Introduction Shareholder control and corporate governance literature has long been discussing the role of proxy fights and their effect in alleviating agency conflicts created by the separation of ownership and management in public companies. The 1992 proxy reform reduced the cost of activist shareholders during proxy fights and significantly increased .

• Kế toán - Kiểm toán
• Proxy fight threat
• Total risk
• Idiosyncratic risk
• Sarbanes Oxley Act
• Quasi natural experiments