Suchergebnisse

The Private Securities Litigation Reform Act (PSLRA) increases restrictions on private litigation for securities fraud. We examine stock price reactions on legislative‐event‐related days of firms in four high‐litigation‐risk industries. Two other studies on this issue, Spiess and Tkac (1997) (ST) and Johnson et al. (2000) (JKN), conclude that shareholders considered PSLRA beneficial. While we find largely similar daily abnormal returns for event‐related days that they examine, we present evidence that the timing of multiple confounding events makes the interpretation of these daily returns ambiguous. Results from additional analyses beyond those conducted by ST and JKN (market price reversal tests, analysis of additional legislative‐event‐related days, cumulative abnormal returns over the legislative period, and analysis of other events affecting investors' ability to bring securities‐related lawsuits), are largely inconsistent with their interpretation, suggesting instead that shareholders in the four high‐litigation‐risk industries react negatively on average to PSLRA's restrictions on their ability to bring securities‐related lawsuits

Policymakers and regulators have been concerned about the impact of audit market concentration resulting from decline in the number of audit firms due to mergers and the demise of Arthur Andersen. In this paper we find a positive association between audit market concentration (Herfindahl index) at the MSA level and audit quality (measured by discretionary accruals and the Dechow-Dichev (2002) measure of accrual quality). We control for fixed year effects, therefore our results are unlikely to be affected by the increase in concentration due to Andersen's demise contemporaneous with an increase in audit quality because of regulatory measures such as SOX. Our results are robust to alternative concentration and audit quality measures, and several sensitivity tests attempting to rule out omitted variables correlated with client firms' MSA location or attributes of clients and auditors. Our results are also robust to controls for endogeneity between audit market concentration and audit quality. Our evidence therefore supports the Government Accountability Office (2003, 2008) conclusions that increased audit market concentration is not currently a cause for concern.