 Does being ethical pay? Evidence from the implementation of SOX Section 406Saurabh Ahluwalia, Linda Ferrell, O.C. Ferrell and Priyank Gandhi Journal of Business Research, 2024, vol. 183, issue C Abstract: Firms that adopt a ‘code of ethics’ targeted towards senior financial officers (CEFO firms) in response to SOX Section 406 have higher valuations (Tobin’s q) than a matched sample of firms of similar size, operating in the same industry that have not yet adopted such a code of ethics (non-CEFO firms). Tracing the mechanism, higher valuations for CEFO firms result from both low risk-adjusted rates and higher cash flows. In turn, higher cash flows for CEFO firms result from increased profitability and lower compliance costs. CEFO firms also benefit from a lower probability of shareholder disputes and shareholder concerns. These results are consistent with models of integrity that predict that firms’ commitment to ethical behavior is associated with better performance. Keywords: Code of ethics for financial officers; Financial reporting; Sarbanes–Oxley market reaction; Market value; Securities legislation; Stock returns; Tobin’s q (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:183:y:2024:i:c:s0148296324003692 DOI: 10.1016/j.jbusres.2024.114865 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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