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http://hdl.handle.net/1783.1/3233
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| Title: | The hiring of accounting and finance officers from audit firms : how did the market react? |
| Authors: | Lennox, Clive
Geiger, Marshall
North, David |
| Keywords: | Audit and reporting quality
Revolving door
Event study |
| Issue Date: | Mar-2008 |
| Citation: | Review of Accounting Studies. 13(1), p. 55-86 |
| Abstract: | The Sarbanes-Oxley Act (SOX) restricted the hiring of accounting and finance officers directly from a company’s external audit firm, reflecting concerns that such “revolving door” appointments had impaired the quality of audited financial statements. However, it was also argued that companies may have benefited from hiring individuals already familiar with their systems, organization and personnel. To determine how shareholders viewed revolving door appointments, we examine three-day cumulative abnormal returns around the announcements of newly appointed accounting and finance officers. We find that the proportion of revolving door hires is low (only 6.1 percent of all hires in our sample) and that the market valued the revolving door appointments more positively than other appointments. Further tests reveal that the positive market reaction to revolving door appointments is driven mainly by smaller companies, and that revolving door appointments are not associated with higher levels of subsequent discretionary accruals and are negatively related to a company’s subsequent receipt of an Accounting and Auditing Enforcement Release (AAER). Overall, the low frequency of occurrence, investors’ positive perceptions, and the lack of association with deteriorated reporting quality indicate that the SOX restriction on revolving door appointments may do little to protect shareholders. |
| Rights: | The original publication is available at http://www.springerlink.com/ |
| URI: | http://hdl.handle.net/1783.1/3233 |
| Appears in Collections: | ACCT Journal/Magazine Articles
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Files in This Item:
| File |
Description |
Size | Format |
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| RAST1253R1_Jan242007.pdf | pre-published version | 278Kb | Adobe PDF | View/Open |
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