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)|
|Number of pages||16|
|Journal||Journal of Institutional and Theoretical Economics|
|State||Published - Mar 2011|
ASJC Scopus subject areas
- Economics and Econometrics