Tech Stock Valuation

DATA 247

involved. Such incremental effects of SEC investigation announcements on share-

holder wealth may stem from the negative publicity generated and the possibility

of third-party lawsuits. At a minimum, Feroz, Park, and Pastena (1991) argue that

the ability of SEC investigation announcements to affect the share prices of target

firms suggests that the agency possesses a potent sanction that gives managers a

market-based incentive to avoid investigation. Interestingly, Feroz, Park, and

Pastena (1991) report no significant abnormal returns tied to the announcement

of settlements of SEC investigations. Apparently, the market discounts such

favorable ...