CEOs'/CFOs' swearing by the numbers: Does it impact share price of the firm?

• 成果类型: Article
• 署名作者: Chang, HH; Chen, JF; Liao, WM; Mishra, BK
• 署名单位: University of California System; University of California Riverside
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2006.81.1.1
• 发表日期: 2006
• 页码: 1-27
• 关键词: Information asymmetry; MARKET; cost; ENFORCEMENT; inference; returns

摘要

We examine the impact on share prices of firms whose CEOs and CFOs certify their financial statements under oath, pursuant to the administrative order issued by the SEC on June 27, 2002. We hypothesize that (1) the certification provides assurance to investors by making disclosure more credible and by reducing information asymmetry between owners and management, and (2) the assurance value of certification is reflected in the stock price of the certifying company. Overall, the empirical results are consistent with our hypotheses. We observe, on average, positive abnormal returns for firms whose CEOs/CFOs certified their financial statements by August 14, 2002. Based on an analysis of bid-ask spreads, certifying firms experienced a significant decline in information asymmetry after certification. In cross-sectional analyses, we find abnormal returns are positively associated with firms that were under investigation, that used Andersen as their auditor, and that practiced aggressive revenue recognition.