The Sarbanes-Oxley Act, Security Analyst Monitoring Activity, and Firm Value

In this study we examine the complementary monitoring activity that takes place via the Sarbanes-Oxley Act (SOX) and its effect on security analyst monitoring activity and firm value of large and small public firms. Our findings indicate that security analyst monitoring activity has decreased post-SOX while firm value has increased post-SOX for both large and small firms. We also find that the increase in firm value is more pronounced for the group of small firms. Given these results, we surmise that the complementary monitoring activity provided by SOX is effective enough to have a positive impact on firm value

The Impact of the Sarbanes-Oxley Act (SOX) on the Cost of Equity Capital of S&P Firms

This study examines the impact of SOX on the cost of equity capital for small and large S&P firms. The provisions of SOX aim to improve internal control systems and reduce information asymmetry by improving corporate governance systems and increasing transparency. Using a fixed-effects regression model, our findings suggest that the cost of equity capital has decreased post-SOX for the overall sample of firms, but more specifically for the small firms, which are usually associated with poor internal control systems and high information asymmetry. Collectively, our results provide evidence that SOX has had a positive impact on firms

Applying Sarbanes-Oxley Principles to Colleges and Universities

In the wake of the financial scandals that have occurred in the corporate sector, the public is demanding more accountability not only from corporations but also from nonprofit organizations such as universities. Institutions can enhance corporate governance by implementing some of the principles and procedures the Sarbanes-Oxley Act of 2002 (SOX) have mandated for public companies. Because public accounting firms audit universities, the firms can provide a valuable service to such clients by recommending ways in which universities can implement SOX practices that are appropriate and applicable. Although SOX does not currently apply to colleges and universities, it has created a climate in which many colleges and universities are considering ways to increase transparency and accountability in their financial operations. The outlook for mandating SOX-like legislation for nonprofits is unclear, both at the federal and state level. There is evidence, however, of some opposition to the implementation of SOX principles at universities

The impact of the Sarbanes-Oxley act on the cost of going public

This paper examines the impact of SOX on the total cost and the component cost of going public. First, we document a statistically significant increase in non-underwriting expenses of 0.8 percentage points after the introduction of SOX, which is mostly due to an increase in accounting and legal fees. Because of the fixed-cost character of this component cost, smaller issues show a much greater percentage increase than larger ones. Second, we demonstrate a highly significant reduction in underpricing in the magnitude of about 4 percentage points. This result is size-independent, and in accordance with the view that SOX reduces adverse selection costs. Third, we find that on average the total flotation costs have decreased between 3 and 3.5 percentage points in the post-SOX period. However, for smaller companies the reduction in underpricing does not compensate anymore for the increase in non-underwriting expenses (i.e., accounting and legal fees). Therefore, the positive impact of SOX on the costs of going public decreases with smaller offering sizes. --Sarbanes-Oxley,SOX,IPO,Going Public,Adverse Selection

The Social Construction of Sarbanes-Oxley

The closer one looks at SOX and its origins in the financial scandals of the early 2000s, the blurrier the picture, which lets commentators see what they want to see and draw inferences accordingly. That is why social construction is so crucial. My aim in this paper is to illuminate the social nature of SOX\u27s diffusion into practice. I will leave to the reader the judgment about whether this has been or will be good or bad, and for whom. If I seem to challenge SOX\u27s critics more than its supporters, it is because the critics have been more venomous than is fair. Venom aside, the bite still deserves attention

A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002

We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behavior of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify the firms most affected by the law as those whose insiders lobbied against strict implementation, and compare their returns to the returns of less affected firms. Cumulative returns during the four and a half months leading up to passage of SOX were approximately 10 percent higher for corporations whose insiders lobbied against one or more of the SOX disclosure-related provisions than for similar non-lobbying firms. Analysis of returns in the post-passage implementation period indicates that investors' positive expectations with regards to the effects of the law were warranted for the enhanced disclosure provisions of SOX.

The Impact of the Sarbanes-Oxley Act on the Cost of Going Public

This paper examines the impact of the Sarbanes-Oxley Act (SOX), a legal framework intended to increase transparency and accountability of listed companies, on the cost of going public in the US. We expect SOX to increase the direct cost of going public, but decrease the underpricing because of reduced asymmetric information. Our main results corroborate these hypotheses. First, we find an increase in the cost of going public of 90 bp of gross proceeds. Second, we record a reduction in underpricing of 6 pp, which is related to a reduced offer price adjustment. This supports our hypothesis that SOX represents a mechanism to reduce asymmetric information.asymmetric information, auditing and legal fees, bookbuilding, IPO, flotation cost, going public, partial adjustment phenomenon, propensity score matching, selection bias, SOX, underpricing, underwriting fees

Multi-scale modeling study of the source contributions to near-surface ozone and sulfur oxides levels over California during the ARCTAS-CARB period

Chronic high surface ozone (O3) levels and the increasing sulfur oxides (SOx = SO2+SO4) ambient concentrations over South Coast (SC) and other areas of California (CA) are affected by both local emissions and long-range transport. In this paper, multi-scale tracer, full-chemistry and adjoint simulations using the STEM atmospheric chemistry model are conducted to assess the contribution of local emission sourcesto SC O3 and to evaluate the impacts of transported sulfur and local emissions on the SC sulfur budgetduring the ARCTAS-CARB experiment period in 2008. Sensitivity simulations quantify contributions of biogenic and fire emissions to SC O3 levels. California biogenic and fire emissions contribute 3–4 ppb to near-surface O3 over SC, with larger contributions to other regions in CA. During a long-range transport event from Asia starting from 22 June, high SOx levels (up to ~0.7 ppb of SO2 and ~1.3 ppb of SO4) is observed above ~6 km, but they did not affect CA surface air quality. The elevated SOx observed at 1–4 km is estimated to enhance surface SOx over SC by ~0.25 ppb (upper limit) on ~24 June. The near-surface SOx levels over SC during the flight week are attributed mostly to local emissions. Two anthropogenic SOx emission inventories (EIs) from the California Air Resources Board (CARB) and the US Environmental Protection Agency (EPA) are compared and applied in 60 km and 12 km chemical transport simulations, and the results are compared withobservations. The CARB EI shows improvements over the National Emission Inventory (NEI) by EPA, but generally underestimates surface SC SOx by about a factor of two. Adjoint sensitivity analysis indicated that SO2 levels at 00:00 UTC (17:00 local time) at six SC surface sites were influenced by previous day maritime emissions over the ocean, the terrestrial emissions over nearby urban areas, and by transported SO2 from the north through both terrestrial and maritime areas. Overall maritime emissions contribute 10–70% of SO2 and 20–60% fine SO4 on-shore and over the most terrestrial areas, with contributions decreasing with in-land distance from the coast. Maritime emissions also modify the photochemical environment, shifting O3 production over coastal SC to more VOC-limited conditions. These suggest an important role for shipping emission controls in reducing fine particle and O3concentrations in SC