The disappearance of the zero-earnings discontinuity: SOX, dotcom boom or gradual decline?
BP2-STS
- Chardonnens, Patrick ORCID University of Fribourg
- Fiechter, Peter ORCID Université de Neuchâtel
- Wallmeier, Martin ORCID University of Fribourg
- 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
-
- DOI 10.1016/j.frl.2022.103033
- ISSN 1544-6123
- Persistent URL
- https://folia.unifr.ch/unifr/documents/328370
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