Journal article

The disappearance of the zero-earnings discontinuity: SOX, dotcom boom or gradual decline?

BP2-STS

  • 2022
Published in:
  • Finance Research Letters. - Elsevier BV. - 2022, vol. 49, p. 103033
English The zero-earnings discontinuity in the US disappeared around the time when the Sarbanes-Oxley Act (SOX) became effective, suggesting that SOX may have reduced the small loss avoidance by firms. In this paper, we examine a potential confounding effect arising from the dotcom boom at the turn of the millennium. Many newly listed dotcom firms had no revenues but high market capitalizations. Therefore, they mechanically fell into the smallest loss interval, artificially reducing the zero-earnings discontinuity. Once this dotcom effect is accounted for, our results no longer suggest a sharp (causal) effect of SOX on the decline in the zero-earnings discontinuity.
Faculty
Faculté des sciences économiques et sociales et du management
Department
Département des sciences du Management
Language
  • English
Classification
Economics
License
CC BY
Open access status
green
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/328370
Statistics

Document views: 1 File downloads:
  • frl_2022_disappearance_sox.pdf: 2