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We study the impact of Sarbanes-Oxley Act (SOX) on the characteristics of firms going private based upon a sample of 147 companies during the period of June 13, 2000 to October 3, 2003. We partition the sample into pre-SOX and post-SOX periods, and cluster analysis is employed to identify firms with similar characteristics. One group of firms is identified before the Sarbanes-Oxley Act, while two groups of firms are identified after the Act. Parametric and non-parametric tests confirm a small group of firms going private with characteristics consistent with the contention that Sarbanes-Oxley Act drives these firms private due to heavy monitoring cost.
The Sarbanes-Oxley Act of 2002, PL 107-204 described by some as the most important and far-reaching securities legislation since passage of the Securities Act of 1933, 15 USC §§ 77a et seq, and the Securities Exchange Act of 1934, 15 USC §§ 78a et seq, both of which were passed in the wake of the Stock Market Crash of 1929. The Act establishes a new Public Company Accounting Oversight Board which is to be supervised by the Securities and Exchange Commission. The Act restricts accounting firms from performing a number of other services for the companies which they audit. The Act also requires new disclosures for public companies and the officers and directors of those companies. Among the other issues affected by the new legislation are securities fraud, criminal and civil penalties for violating the securities laws and other laws, blackouts for insider trades of pension fund shares, and protections for corporate whistleblowers. This book contains important analyses on the impact of this Act.
We investigate firms' going-private decisions in response to the passage of the Sarbanes-Oxley Act of 2002 (SOX). The Act has the potential to bring both benefits, in terms of more transparent disclosure and improvements in corporate governance, and costs, in terms of complying with the new regulation. We argue that firms go private in response to SOX only if the SOX-imposed costs to the firm exceed the SOX-induced benefits to shareholders, and this difference swamps the net benefit of being a public firm prior to the passage of SOX. By examining a sample of all going-private firms from 1998 to 2004, we find: (1) the quarterly frequency of going private has modestly increased after the passage of SOX; (2) the abnormal returns associated with the passage of SOX were positively related to firm size and share turnover; (3) smaller firms and firms with greater inside ownership have experienced higher going-private announcement returns in the post-SOX period compared to the pre-SOX period. Our empirical evidence is broadly consistent with the notion that SOX has affected firms' going-private decisions.
As of the end of 2006, small businesses, which were once exempt, now have to comply with Sarbanes-Oxley (SOX). Under Sarbanes-Oxley, they will now be exposed to audits, reviews and will have to make their profits, losses, and compensation packages public. The Complete Guide to Sarbanes-Oxley will answer the following questions: How do companies comply with SOX? How does SOX effect relations within the firm? Should a public company go private to avoid SOX? The Complete Guide to Sarbanes-Oxley is a nontechnical, "plain English" guide for the managers and directors of the 13,000 publicly held corporations now subject to SOX. No business owner should be without it!
This unique volume presents policy recommendations designed to promote entrepreneurship. It considers timely issues like impact of securities regulation, educational policy and intellectual property protection on entrepreneurship. In the process, the book addresses policies operating at the individual, national, regional, and international levels, and offers a unique perspective on several institutional structures that enhance entrepreneurship and economic growth.
We examine whether voluntary deregistrations after the passage of Sarbanes-Oxley Act of 2002 (SOX) were intended to benefit common shareholders by avoiding firms' costs of complying with SOX and/or to protect the control rents of managers or controlling shareholders (MCOs) from the corporate governance mandates of SOX. We find that, compared to foreign firms that maintained their SEC registrations, foreign firms which voluntarily deregistered on average had weaker corporate governance, had a significantly less negative stock market reaction when SOX was passed, and suffered a significant price decline when they announced their decision to deregister. We also find evidence indicating that the deregistrations were (to a lesser extent) motivated by firms' compliance costs related to SOX. Taken together, our results suggest that both agency costs (i.e., private benefit of control of the MCOs) and the compliance cost of SOX play a role in motivating foreign firms to withdraw from the U.S. market. Comparative analysis of voluntary delistings from the LSE Main Market supports the notion that SOX and its related agency costs constitute important factors in firms' decision to leave the U.S.
The authors argue that the Sarbanes-Oxley Act of 2002 (SOX) is a colossal failure, yet seek to salvage some lessons from the ruins of SOX.
The Sarbannes-Oxley Act (SOX) is a mandatory requirement for all listed corporations in the US, whether foreign or not. Compliance is not an option. Other countries are developing similar legislation so the books value is international in scope. SOX is a hot topic and the effects are just beginning to be felt world-wide. This new book goes beyond the implementation phase of SOX and looks at the reaction to the Act in terms of costs, benefits and business impacts. This book is for Senior Managers in the Business and Financial/Accounting Communities who want/need to know what the reaction of business and government is to the SOX legislation, what it is costing and how the effects are penetrating through the business environment.Mike Holt presents a comprehensive review of the impact that Sarbanes-Oxley legislation has had on business, the financial community, governments and the public since its inception in 2002. The Sarbanes-Oxley Act has been somewhat successful, but not completely and the cost (well over a trillion dollars) might be considered too high a price to pay for the gains. This book takes a hard look at the costs, benefits and other impacts as well as at what influential and prominent financial, government and business leaders think about it now.* International in scope and content and including interviews with prominent business leaders, CEOs and CFOs of large and small corporations.* Compliance with The Sarbanes-Oxley Act is now mandatory for every listed US corporation and overseas corporations listed on US stock markets.* Covers the reaction of business and government to this legislation, what it is costing and how the effects are penetrating through the business environment.