This paper discusses evidence on the costs of the Sarbanes–Oxley Act (SOX) from stock returns
and going-private decisions. Zhang, [2007. Economic consequences of the Sarbanes–Oxley Act of
2002. Journal of Accounting and Economics, doi:10.1016/j.jacceco.2006.07.002] analyzes returns
around legislative events and concludes that SOX imposes significant costs on firms. Engel, et al.
[2007. The Sarbanes–Oxley Act and firms’ going-private decisions. Journal of Accounting and
Economics, doi:10.1016/j.jacceco.2007.02.002] examine going-private decisions and point to
unintended consequences. Both studies are carefully conducted and deserve praise for tackling an
important issue. However, as my discussion highlights, several key findings may not be attributable
to SOX and we should exercise caution in interpreting the evidence. While it is not implausible
that one-size-fits-all regulation imposes substantial costs on firms, we presently do not have much
SOX-related evidence to support this conclusion.
This paper discusses evidence on the costs of the Sarbanes–Oxley Act (SOX) from stock returnsand going-private decisions. Zhang, [2007. Economic consequences of the Sarbanes–Oxley Act of2002. Journal of Accounting and Economics, doi:10.1016/j.jacceco.2006.07.002] analyzes returnsaround legislative events and concludes that SOX imposes significant costs on firms. Engel, et al.[2007. The Sarbanes–Oxley Act and firms’ going-private decisions. Journal of Accounting andEconomics, doi:10.1016/j.jacceco.2007.02.002] examine going-private decisions and point tounintended consequences. Both studies are carefully conducted and deserve praise for tackling animportant issue. However, as my discussion highlights, several key findings may not be attributableto SOX and we should exercise caution in interpreting the evidence. While it is not implausiblethat one-size-fits-all regulation imposes substantial costs on firms, we presently do not have muchSOX-related evidence to support this conclusion.
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