The unintended effects of the Sarbanes-Oxley Act

Vidhi Chhaochharia; Clemens A. Otto; Vikrant Vig

doi:10.1628/093245611794656435

The unintended effects of the Sarbanes-Oxley Act

Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

The Sarbanes-Oxley Act (SOX) was passed in the wake of several scandals that rocked corporate America in 2001 and 2002. The objective behind SOX was to improve corporate governance by improving accounting disclosures. Compliance with Section 404 is considered by many to be themost costly requirement of SOX and has been argued to be a disproportionate burden for small firms. Consequently, firms with a public float below $75 million were granted several exemptions from compliance.We document an unintended effect of these exemptions: a weakening of corporate governance through a weakening of the market for corporate control.

Original language	English (US)
Pages (from-to)	149-164
Number of pages	16
Journal	Journal of Institutional and Theoretical Economics
Volume	167
Issue number	1
DOIs	https://doi.org/10.1628/093245611794656435
State	Published - Mar 2011

ASJC Scopus subject areas

Economics and Econometrics

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The unintended effects of the Sarbanes-Oxley Act

Abstract

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