Abstract
Responding to the recent accounting scandals, the Securities and Exchange Commission (SEC) required chief executive officers (CEOs) and chief financial officers (CFOs) of large publicly traded companies to swear by their financial statements. Focusing on executive oaths that were filed by the first deadline of August 14, 2002, this study finds that stock markets, on average, reacted positively to executive oaths. Further, based upon signaling theory, this study finds that CEO shareholding, external directorships, and long CEO tenure (seven years or longer) are positively related, whereas prior filing of financial restatements with the CEO in office is negatively related to the abnormal stock returns. It appears that as stock markets generally reward companies' conformity to institutional requirements, the extent to which individual companies are rewarded can be affected by their CEO backgrounds.
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