Sarbanes-Oxley Act and patterns in stock returns around executive stock option exercise disclosures

We document negative stock returns and elevated trading volumes around executives' early option exercise disclosures post-SOX, but not pre-SOX. This stock price reaction is incomplete, and the negative stock price drift is smaller post-SOX compared to pre-SOX. We also show effects of media coverage in the stock price response to exercise disclosures in the post-SOX period. These findings provide evidence that the requirement mandated by SOX to disclose executives' stock option exercises within two business days, and the increased media coverage, improves investors' ability to incorporate into stock prices in a timely fashion the information conveyed by these exercises.