Two New Papers Seek to Assess the Costs of Sarbanes-Oxley

Two working papers were recently released on SSRN which seek to assess the impact of the Sarbanes-Oxley Act on smaller firms.   Both papers conclude that more study is needed. 

Ehud Kamar, Pinar Karaca-Mandic and Eric Talley have posted  Sarbanes-Oxley’s Effects on Small Firms: What is the Evidence?  The paper reviews a number of studies on the impact of Sarbanes Oxley on smaller firms.  The authors conclude that prior studies lend support to the propostion that Sarbanes-Oxley had a disproportionate impact on smaller firms, but the evidence is not conclusive. 

Christian Leuz has posted Was the Sarbanes-Oxley Act of 2002 Really this Costly? A Discussion of Evidence from Event Returns and Going-Private Decisions.  Leuz disputes the conclusions of several studies finding increased net costs for Sarbanes-Oxley.  He argues that several of these studies’ key findings may not be attributable to Sarbanes-Oxley, but may instead reflect broader market trends. Leuz concludes we do not have much SOX-related evidence that one-size-fits-all regulation imposes significant costs on firms, and that there is evidence that Sarbanes-Oxley has increased the scrutiny on firms and produced certain benefits.

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2 Responses to Two New Papers Seek to Assess the Costs of Sarbanes-Oxley

  1. […] regarding costs and benefits of Section 404 of the Sarbanes-Oxley Act.  Like the articles posted below, Prentice concludes it is too early to tell whether Section 404 is working.  He goes further, […]

  2. Mike says:

    Like every coin has two sides, you can say the same applies to regulatory compliance authorities also for example SOX. No doubt that SOX regulatory authority had put an additional burden on organization which is quit tough to comply in terms of time and money as the process is quite time consuming and expensive but looking from the positive side, it provides an additional benefit to shareholder to fully rely on the organization which is SOX compliant. Also many SOX compliant organization are able to make a transparent business and are able to restructure the risk management function, internal controls, and IT security which in long-term is quite profitable.

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