Abstract

In the first essay, we study the information content of Form 4 filings under the stricter disclosure regulations introduced by the Sarbanes-Oxley Act (SOX) of 2002, by examining the abnormal returns around the filing date. Our results show that for both the purchase and sale samples, the information content of the filings has improved significantly between the pre- and post- SOX periods. We also find that progressive regulatory changes and the increased uncertainty in the market in recent years as a result of the credit crunch in 2008 have made insider transactions more informative. Our results also show that the rank of the insider (CEO, CFO, etc.) has the most influence in explaining the abnormal returns. Finally, in cross-sectional tests, we find that the information content of the filings is stronger for firms with more information asymmetry. Overall, we report that the more timely filing requirement introduced by SOX has been beneficial for investors, particularly for firms with higher levels of information asymmetry.
In the second essay, we examine the effects of the Sarbanes-Oxley Act (SOX) of 2002 on the short and long-run performance of corporate acquisitions. Using a large sample of tender offers between 1996 and 2009, we find that the proportion of value maximizing acquisitions increased after the passage of SOX. The price run-up and the intensity of insider trading prior to the announcement in the target firms have substantially decreased after the Act. Using industry and matched firm portfolios, we also find that both the operating performance and buy-and-hold abnormal returns over the three and five year post-acquisition period improved significantly after SOX.
In the final essay, we examine the effects of Ontario Bill-198 (CSOX-2003), the strictest corporate law in Canada. Despite some drawbacks, we find the Act has added significant value contrary to many practitioners’ beliefs. Using a large sample of Canadian tender offers between 1996 and 2009, we find that both target and acquirer shareholders experience higher abnormal returns closer to announcement dates in the post CSOX period. Using industry adjusted portfolio, we also find that the long term post-acquisition operating performances for the acquiring firms have significantly improved in the post-Act period. Overall, our results suggest that CSOX has an incremental positive impact on Canadian acquisition activity.