The unintended effects of the Sarbanes-Oxley Act

Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig

Research output: Contribution to journalArticle

5 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 languageEnglish (US)
Pages (from-to)149-164
Number of pages16
JournalJournal of Institutional and Theoretical Economics
Volume167
Issue number1
DOIs
StatePublished - Mar 2011

ASJC Scopus subject areas

  • Economics and Econometrics

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