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Informedness and Consensus of Accounting Information post Sarbanes-Oxley Act: High-Tech Firms versus Low-Tech Firms
Sung S. Kwon,
York University
Brian Gaber, York University
Liona Lai, York University
ABSTRACT. This paper draws upon the theory on the price and volume behavior developed by Holthausen and Verrecchia (1990) and examines the informedness and consensus of accounting information post Sarbanes-Oxley Act (SOX thereafter). If the decrease in the metrics is due to a change in levels of common noise in available accounting information, then the decrease in stock return variance would indicate a decrease in informedness and/or consensus, while the decrease in trading volume would unambiguously indicate a decrease in informedness and an increase in consensus. We find that both trading volume and price variability metrics have decreased post SOX during the release of accounting information. We also document that the results are robust only for high-tech firms and not for low-tech firms, which can be explained by the implementation of more conservative accounting methods in the high-tech sector.
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