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Article
Publication date: 12 February 2018

Harjeet S. Bhabra and Ashrafee T. Hossain

The purpose of this paper is to examine whether or not the seminal legislation called the Sarbanes-Oxley Act (SOX) influenced a strategic shift in the merger and acquisition (M&A…

558

Abstract

Purpose

The purpose of this paper is to examine whether or not the seminal legislation called the Sarbanes-Oxley Act (SOX) influenced a strategic shift in the merger and acquisition (M&A) market.

Design/methodology/approach

The sample consists of 4,839 completed deals undertaken by US acquirers from the Securities Data Corporation’s US M&As database from January 1, 1996 to December 31, 2009. The authors used the standard event study methodology for short-term performance analysis and the Berkovitch and Narayanan (1993) method to identify merger motives.

Findings

By following the same acquirers who participated during both pre- and post-SOX periods, the authors find that these acquirers generate 1-1.5 percent more returns for their stockholders around M&A announcement dates and that the motivation has shifted to value maximization (synergy), a notable strategic shift.

Research limitations/implications

All acquirers and targets are public.

Originality/value

This paper adds to SOX-related literature as well as to M&A literature. By analyzing M&A deals, often the largest capital investments for acquirers, this paper shows that, despite criticism of SOX, this legislation fundamentally contributed to a strategic shift in the M&A market.

Details

Managerial Finance, vol. 44 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 19 September 2019

Harjeet S. Bhabra, Ashrafee Tanvir Hossain and Vidyoot Roy Karmakar

The purpose of this paper is to examine existing literature, including both academic and practitioner publications, related to Canadian SOX (or C-SOX as it is popularly known)…

197

Abstract

Purpose

The purpose of this paper is to examine existing literature, including both academic and practitioner publications, related to Canadian SOX (or C-SOX as it is popularly known). The study discusses the origins of the Act, the underlying motivations for enacting this legislation in Canada and its impact on corporate decisions since its inception in 2003.

Design/methodology/approach

The principal focus of this literature review is on C-SOX, its inception, reception, compliance and impact in Canada, both from business’ and investors’ critical perspectives. The authors have followed a two-step process to gather all the articles. First, the authors used a keyword search at Google Scholar and ProQuest (e.g. C-SOX, Canadian SOX, Bill 198, etc.) to gather all the articles. Second, the authors retained articles and abstracts that primarily dealt with the background framework and impact of the legislation. It is to be noted that C-SOX was mainly a reactionary legislation following the adoption of US-SOX in 2002. Any discussion of C-SOX is, therefore, incomplete without referencing the literature related to US-SOX.

Findings

In this review paper the evolution of C-SOX over time in Canada, as well as studies on its impacts and criticisms have been summarized. Based on the extensive research that followed the enactment of US-SOX, the authors also provide suggested research directions related to C-SOX in the future.

Research limitations/implications

C-SOX has been relatively underexplored and therefore, not much academic work is available presently. This study highlights this gap in the literature with the hope that researchers will devote their energy to understanding the broader ramifications of major legislations such as C-SOX which will potentially also inform future public policy choices.

Practical implications

This research will help both businesses and investors to understand each other’s perspectives and concerns regarding C-SOX. This paper will also be helpful to policy makers to identify potential areas of improvement in this and future legislative decisions in the future.

Originality/value

Using a qualitative approach this study combines the development of C-SOX as a legislation in Canada, its overall effectivity/drawbacks and explores the areas it impacts, both positively and negatively, along with criticisms and appreciations.

Details

Managerial Finance, vol. 46 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 April 2001

Debi Prasad Mishra and Harjeet S. Bhabra

Actual and intended new product introduction announcements constitute significant events for firms’ customers, competitors, and investors. Typically, past research has focused on…

2186

Abstract

Actual and intended new product introduction announcements constitute significant events for firms’ customers, competitors, and investors. Typically, past research has focused on the economic impact of actual new product introduction announcements. However, research relating to firms’ intentions to introduce new products is relatively uncommon. These intended introductions or “pre‐announcements” have important strategic objectives and affect a firm’s customers and competitors in significant ways. Builds upon existing theory to study the economic impact of product pre‐announcement signals. Adopts the event study methodology and explores the relationship between product pre‐announcements and stock prices. Results show that relatively irreversible product pre‐announcements, i.e., those containing “evidence” are valued positively by the stock market. In contrast, the stock market ignores bluffs or easily reversible announcements that lack such evidence. Given the significance of pre‐announcements, managers should take these signals seriously. Discusses how product managers may use these results to develop actionable strategies for communicating with investors. Outlines the contribution of this paper to product management theory.

Details

Journal of Product & Brand Management, vol. 10 no. 2
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 30 July 2018

Harjeet Bhabra and Ashrafee Tanvir Hossain

The purpose of this paper is to analyze and compare the influence of the Sarbanes–Oxley (SOX) Act of the USA and the Canadian SOX (C-SOX) through the comparison of corporate…

237

Abstract

Purpose

The purpose of this paper is to analyze and compare the influence of the Sarbanes–Oxley (SOX) Act of the USA and the Canadian SOX (C-SOX) through the comparison of corporate acquisitions in these two countries.

Design/methodology/approach

The final sample includes 1,187 merger and tender offers undertaken by publicly traded (TSX listed) Canadian firms between 1990 and 2016. The authors use standard event study methodology (Patell, 1976) and Berkovitch and Narayanan’s (1993) seminal method to examine announcement period performance and deal motive, respectively.

Findings

The findings support the pro-regulation hypothesis which states that stricter regulations are more useful. Cross-listed acquirers exposed to SOX regime performed much better (both short- and long-term) than non-cross-listed counterparts with only C-SOX exposure. These findings are both statistically and economically significant.

Research limitations/implications

This study has direct implications as it provides evidence to the legislatures of the provinces, as well as to the federal government, that stricter regulations are effective and Canada should enact additional corporate legislation. Canada may have fared well in the past, but dynamics are changing and may further change in the future, and therefore, timely and stricter corporate legislation are more appropriate.

Practical implications

This study has direct implications as it provides evidence to the legislatures of the provinces, as well as to the federal government, that stricter regulations are effective and Canada should enact additional corporate legislation. Canada may have fared well in the past, but dynamics are changing and may further change in the future, and therefore, timely and stricter corporate legislation are more appropriate.

Originality/value

This study contributes to the growing literature of SOX-related studies. This is the first study to investigate comprehensively the differences between the two laws enacted by these neighboring countries. As USA and Canada share largely integrated capital markets and are each other’s biggest trading partner, this genre of research has great value. It is a timely study as the Canadian Federal Government is looking into standardizing corporate legislation across provinces and territories.

Details

Managerial Finance, vol. 44 no. 8
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 10 April 2017

Harjeet Singh Bhabra and Ashrafee Tanvir Hossain

The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses.

1324

Abstract

Purpose

The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses.

Design/methodology/approach

The sample includes 9,463 mergers and tender offers undertaken by publicly traded US firms between 1996 and 2009. The authors used the standard event study methodology for short-term performance analysis; Berkovitch and Narayanan (1993) method to identify merger motives; and standard benchmark adjusted return on assets (sales) (Barber and Lyon, 1996) and buy-and-hold abnormal returns (Mitchell and Stafford, 2000) to analyze long-term performance.

Findings

Compared to the pre-SOX period, US acquirers experience significantly higher announcement returns in the post-SOX period; the results are robust to various controls like bidder, target and deal characteristics, bidder management quality, and product market competition. Similar results (in favor of post-SOX US acquirers) are obtained with long-term post-acquisition operating and stock performance analyses.

Research limitations/implications

This paper only addressed domestic acquisitions.

Originality/value

This paper adds to the growing body of research on the impact of SOX on publicly traded US corporations. By examining corporate acquisitions, an important long-term investment decision for a firm, the paper shows that despite the complex nature of SOX, substantial compliance costs and the unintended negative consequence it engendered, the act had a beneficial impact in an important area of corporate finance.

Details

Managerial Finance, vol. 43 no. 4
Type: Research Article
ISSN: 0307-4358

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Available. Content available
Article
Publication date: 18 March 2020

Ashrafee Tanvir Hossain and Harjeet Bhabra

690

Abstract

Details

Managerial Finance, vol. 46 no. 2
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 1 October 2015

Nilanjan Basu, Imants Paeglis and Mohammad Rahnamaei

We examine the influence of ownership structure on a blockholder’s power in a firm. We first describe the presence and ownership stakes of blockholders in a comprehensive sample…

Abstract

We examine the influence of ownership structure on a blockholder’s power in a firm. We first describe the presence and ownership stakes of blockholders in a comprehensive sample of US firms. We develop a measure of the influence of the ownership structure on a blockholder’s power and show that an average blockholder loses 12% of her potential power due to the presence and size of the ownership stakes of other blockholders. Further, the influence of ownership structure varies systematically with a blockholder’s rank and identity, with the second and nonfamily manager blockholders experiencing the largest loss of power.

Details

International Corporate Governance
Type: Book
ISBN: 978-1-78560-355-6

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Article
Publication date: 19 September 2023

Gurmeet Singh Bhabra and Ashrafee Tanvir Hossain

The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the…

177

Abstract

Purpose

The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the firms they manage, with the aim to examine whether CEO incentives play a role in corporate risk-taking.

Design/methodology/approach

The authors investigate the relation between CEO inside debt holdings (CIDH) (pension benefits and deferred compensation) and the operating leverage (DOL) of the firms they manage. Using a sample of 11,145 US firm-year observations over the period 2006–2017, the authors find a strong negative association between CIDH and DOL. Additional analyses reveal that the relationship between CIDH and DOL is more pronounced in firms with heightened agency issues, powerful CEOs and for CEOs with stronger professional networks. The results are robust to various sensitivity and endogeneity tests.

Findings

The authors find strong evidence confirming the expected negative association between CEO inside debt and DOL suggesting that firms with higher inside debt tend to maintain lower levels of operating leverage. These findings continue to hold with the alternative measure for the inside debt and operating leverage, and across a range of tests designed to rule out the possibility that the primary findings are in any way driven by potential endogeneity. In addition, the findings demonstrate that the presence of manager-shareholder agency conflicts can strengthen the inside debt–DOL relationship suggesting the strong role of inside debt in reducing firm risk.

Research limitations/implications

Findings in this paper have implications for design of compensation structures so that corporate boards can establish incentives as a tool for risk management. A limitation of this study is that it is focused on one market, i.e. US listed companies, so the findings may not be applicable on a global scale.

Originality/value

To the best of the authors’ knowledge, this is the first study that links firm-level management of operating leverage through design of CEO inside debt incentives (two obvious choices for risk-reduction at the CEOs’ disposal include reducing financial risk through reduction of firm leverage and reducing operating risk through reduction of operating leverage). While use of firm leverage as an instrument of choice has been explored in the past, use of operating leverage to achieve risk reduction when CEO possess high inside holding, has received very little attention.

Details

Meditari Accountancy Research, vol. 32 no. 3
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 1 February 2003

ERCAN TIRTIROĞLU and DOĞAN TIRTIROĞLU

In an efficient market, where the participants form their expectations rationally, all potential changes induced by a predictable event are incorporated into the asset prices…

89

Abstract

In an efficient market, where the participants form their expectations rationally, all potential changes induced by a predictable event are incorporated into the asset prices before the uncertainty relating to the outcome of the event is resolved. This paper develops a methodology to test whether temporal prices of fixed income assets reflect market efficiency. The methodology developed employs the Fisher information measure, which is couched within the framework of a moving variance process. We empirically demonstrate the methodology for U.S. Treasury's first exercise, in three decades, of its option to call (on October 09, 1991) one of its outstanding callable bonds. Empirical results indicate a delayed market reaction.

Details

Studies in Economics and Finance, vol. 21 no. 2
Type: Research Article
ISSN: 1086-7376

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