Has Section 404 of the Sarbanes-Oxley Act Discouraged Corporate Risk-Taking? New Evidence from a Natural Experiment

Albuquerque, Ana M.; Zhu, Jia

doi:10.2139/ssrn.1997228

Cited by 5 publications

(6 citation statements)

References 19 publications

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“…firms in the period after SOX. In contrast, Albuquerque and Zhu [] find an increase in R&D (and total) investments using a regression‐discontinuity design around the $75 million threshold. But, again, this evidence applies only to firms close to the size threshold.…”

Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 94%

“…But, again, this evidence applies only to firms close to the size threshold. Albuquerque and Zhu [] also show that, for a large sample of U.S. firms, corporate investment starts to decline in 1999, not in 2003 when SOX becomes effective. Thus, as discussed in Coates and Srinivasan [], while there seems to be a decline in U.S. investment, it is not clear that the trend is driven by SOX, rather than broader changes in the U.S. environment.…”

Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 99%

“…It does not exploit the staggered introduction of SOX for some firms and hence the documented liquidity changes could also reflect general trends, concurrent events, and/or increased market discipline after SOX. To avoid these concerns, Albuquerque and Zhu [] exploit the public float cutoff for Section 404 compliance and use a regression‐discontinuity design. They find a modest increase in market liquidity for firms subject to Section 404 of SOX relative to firms that are below the cutoff .…”

Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 99%

See 2 more Smart Citations

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Leuz

Wysocki

2016

J of Accounting Research

1,340

382

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This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the

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Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 94%

Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 99%

Section: Evidence On the Economic Effects Of Disclosure Regulationmentioning

confidence: 99%

See 1 more Smart Citation

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Leuz

Wysocki

2016

J of Accounting Research

1,340

382

View full text Add to dashboard Cite

show abstract

“…Bargeron, Lehn, and Zutter (2010), Kang, Liu, and Qi (2010), and Gao and Zhang (2018) find that U.S. firms' investment declines relative to international firms' investment following SOX. In contrast, Albuquerque and Zhu (2018) find no effect of SOX on investment using a regression discontinuity design similar to that of Gao and Zhang (2018). Coates and Srinivasan (2014) summarize this literature noting that U.S. investment declines in the years predating SOX, but it is unclear whether it is attributable to SOX or broader changes in the U.S. environment.…”

Section: Introductionmentioning

confidence: 90%

Do the Burdens to Being Public Affect the Investment and Innovation of Newly Public Firms?

Dambra

Gustafson

2021

Management Science

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We examine how regulatory burdens affect the investment and innovation of newly public firms. To do so, we exploit the Jumpstart Our Business Startups (JOBS) Act, which eliminates certain disclosure, auditing, and governance requirements for a subset of newly public firms. Firms treated with these reduced burdens invest more and more efficiently after going public relative to untreated firms. These findings are concentrated in innovative investments and are nonexistent in dual-class firms. Overall, our findings suggest that the burdens to being public exacerbate agency frictions, which lead managers to take on fewer risky projects. This paper was accepted by Suraj Srinivasan, accounting.

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“…In fact, Bates, Kahle and Stulz (2009) document a trend of increasing levels of cash holdings and lower leverage for US firms starting early 1980s. Albuquerque and Zhu (2013) contest the findings of SOX driven lower investments using a regression discontinuity design similar to Iliev (2010). They compare firms that were just above and below the threshold of $ 75…”

Section: Indirect Costs Of Soxmentioning

confidence: 99%

SOX after Ten Years: A Multidisciplinary Review

Coates

Srinivasan²

2013

SSRN Journal

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We review and assess research findings from 120+ papers in accounting, finance, and law to evaluate the impact of the Sarbanes-Oxley Act. We describe significant developments in how the Act was implemented and find that despite severe criticism, the Act and institutions it created have survived almost intact since enactment. We report survey findings from informed parties that suggest that the Act has produced financial reporting benefits. While the direct costs of the Act were substantial and fell disproportionately on smaller companies, costs have fallen over time and in response to changes in its implementation. Research about indirect costs such as loss of risk taking in the U.S. is inconclusive. The evidence for and social welfare implications of claimed effects such as fewer IPOs or loss of foreign listings are unclear. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. On balance, research on the Act's net social welfare remains inconclusive. We end by outlining challenges facing research in this area, and propose an agenda for better modeling costs and benefits of financial regulation.

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Has Section 404 of the Sarbanes-Oxley Act Discouraged Corporate Risk-Taking? New Evidence from a Natural Experiment

Cited by 5 publications

References 19 publications

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Do the Burdens to Being Public Affect the Investment and Innovation of Newly Public Firms?

SOX after Ten Years: A Multidisciplinary Review

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