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The Sarbanes-Oxley Act and Firms ’ Going-Private Decisions
| Content Provider | Semantic Scholar |
|---|---|
| Author | Engel, Ellen Hayes, Rachel M. Wang, Xue May |
| Copyright Year | 2004 |
| Abstract | We investigate firms’ going-private decisions in response to the passage of the SarbanesOxley Act of 2002 (SOX). The Act has the potential to bring both benefits, in terms of more transparent disclosure and improvement in corporate governance, and costs, in terms of complying with the new regulation. We argue that firms go private in response to SOX only if the SOX-imposed costs to the firm exceed the SOX-induced benefits to shareholders, and this difference swamps the net benefit of being a public firm prior to the passage of SOX. By examining a sample of all going-private firms from 1998 to 2004, we find: (1) the quarterly frequency of going private has modestly increased after the passage of SOX; (2) the abnormal returns associated with the passage of SOX were positively related to firm size and share turnover; (3) smaller firms and firms with greater inside ownership have experienced higher going-private announcement returns in the post-SOX period compared to the pre-SOX period. Our empirical evidence is broadly consistent with the notion that SOX has affected firms’ going-private decisions. Graduate School of Business, University of Chicago. We thank attorneys at the SEC Corporation Finance Division for helpful explanations regarding going-private transactions, and Scott Schaefer and workshop participants at the University of Utah for comments. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://leeds-faculty.colorado.edu/bhagat/SOX-GoingPrivate.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Annual Reports Computer security Corporate governance Corporate organization code:ID:Pt:Dialysis facility:Nom:ESRD Disclosure Ephrin Type-B Receptor 1, human Financial Statements Financial Times Financial cost Requirement Rule (guideline) Small The Wall Street Journal TimeLine Fluoride Releasing Resin benefit corporation explanation responsibility standards characteristics |
| Content Type | Text |
| Resource Type | Article |
