The Sarbanes Oxley Act of 2002: Implications for Compensation Structure and Risk-Taking Incentives of CEOs

2004 ◽  
Author(s):  
Daniel A. Cohen ◽  
Aiyesha Dey ◽  
Thomas Lys
Keyword(s):  
Risk Taking ◽  
Compensation Structure ◽  
Sarbanes Oxley

scholarly journals Firm Risk and Proxy Fights: Evidence from SOX

2018 ◽  
Vol 7 (2) ◽  
pp. 96
Author(s):  
Fang Chen ◽  
Jian Huang ◽  
Han Yu
Keyword(s):  
Risk Taking ◽  
Idiosyncratic Risk ◽  
Total Risk ◽  
Firm Risk ◽  
Exogenous Shock ◽  
Sarbanes Oxley ◽  
Proxy Fights

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.

scholarly journals Corporate governance, audit quality and risk taking in the U.S. property casualty insurance industry

2009 ◽  
Vol 7 (1) ◽  
pp. 84-95 ◽  
Author(s):  
Chia-Ling Ho ◽  
Gene Lai ◽  
Jin-Ping Lee
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Audit Quality ◽  
Net Present Value ◽  
Insurance Industry ◽  
Deep Understanding ◽  
Sarbanes Oxley ◽  
The Impact ◽  
The U.S ◽  
Property Casualty

This paper examines the impact of corporate governance and audit quality on risk-taking in the U.S. property casualty insurance industry. The evidence shows that some corporate governance variables, as well as some audit quality variables are related to risk-taking. We find that longer board tenure is associated with low underwriting risk. But the higher percentage of financial experts on the board is associated with high underwriting risk. The possible reason is that financial experts possess a deep understanding of a firm’s financial situation and may encourage the management to take higher risk in anticipation of a higher return for a positive net present value project. The results are consistent with agency theory and wealth transfer hypothesis in that high risk taking is consistent with shareholder interest maximization. In addition, we find a non-monotonic relation between insider ownership and leverage risk. Finally, we do not find evidence that the Sarbanes-Oxley act have impact on the risk taking behavior.

Are Corporate Risk-Taking Practices Indicative of Aggressive Reporting Practices?

2017 ◽  
Vol 40 (1) ◽  
pp. 31-55 ◽  
Author(s):  
Mary Margaret Frank ◽  
Luann J. Lynch ◽  
Sonja Olhoft Rego ◽  
Rong Zhao
Keyword(s):  
Financial Reporting ◽  
Risk Taking ◽  
Positive Association ◽  
Managerial Opportunism ◽  
Reporting Practices ◽  
Sarbanes Oxley ◽  
Organic Growth ◽  
Asset Growth ◽  
Corporate Risk

ABSTRACT We examine empirically whether the manner of risk-taking in which firms engage is associated with aggressive reporting practices. Theoretical and anecdotal evidence suggests that firms face a trade-off between risk-taking and managerial opportunism as they seek to produce higher returns. In the period before the Sarbanes-Oxley Act of 2002 (SOX), we find that firms with more risk-taking through external asset growth are more likely to engage in aggressive reporting, but the reverse is true for firms with a practice of risk-taking through organic growth. Consistent with evidence in prior research on the improved quality of financial reporting after SOX, the positive association between a practice of risk-taking through asset growth and aggressive reporting is attenuated in the post-SOX period.

Sarbanes-Oxley and Corporate Risk-Taking

2008 ◽  
Author(s):  
Leonce Bargeron ◽  
Kenneth Lehn ◽  
Chad J. Zutter
Keyword(s):  
Risk Taking ◽  
Sarbanes Oxley ◽  
Corporate Risk
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