SOX Section 404 and Corporate Innovation

Gao, Huasheng; Zhang, Jin

doi:10.1017/s0022109018000844

Cited by 51 publications

(25 citation statements)

References 58 publications

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“…Other studies investigate this question using the introduction of SOX as a policy shock to the burdens of being public. 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).…”

Section: Introductionmentioning

confidence: 97%

“…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: 97%

“…All of these provisions remain in effect for up to five years after a firm's IPO. 2 See, for example,Bargeron, Lehn, and Zutter (2010),Kang, Liu, and Qi (2010),Albuquerque and Zhu (2018),Coates and Srinivasan (2014),Gao and Zhang (2018),Hanley (2017), andLeuz and Wysocki (2016).…”

mentioning

confidence: 99%

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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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Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 97%

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

Dambra

Gustafson

2021

Management Science

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“…First, our findings highlight that the real benefits of mandatory disclosure, as measured by growth opportunities, outweigh the managerial freedom and cost savings resulting from deburdening regulations like the JOBS Act. This contributes new evidence to the literature that has focused on how disclosure affects corporate investment (Coates and Srinivasan, 2014;Dambra and Gustafson, 2021;Gao and Zhang, 2018;Kraft, Vashishtha and Venkatachalam, 2018), but has largely been silent on how disclosure-contingent financing and investment affect firm growth. Second, our paper adds to the literature on the determinants of firm value (Bushee and Leuz, 2005;Greenstone, Oyer and Vissing-Jorgensen, 2006;Loderer, Stulz and Waelchli, 2017), and shows that Tobin's q falls more rapidly over time among disclosure-exempt firms.…”

Section: Introductionmentioning

confidence: 81%

Disclosure, Firm Growth, and the JOBS Act

Divakaruni

Jones

2021

SSRN Journal

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We study the effects of regulatory disclosure on investment and growth by comparing newly public firms before and after they lose disclosure exemptions under the Jumpstart Our Business Startups (JOBS) Act. Exempt firms invest more in physical assets, innovation, and acquisitions than firms that lose exemptions, but experience steeper declines in growth opportunities over time. Firms that lose exemptions exhibit better allocation of equity to investments and utilization of existing assets, which improves their Tobin's q. Relaxing disclosure requirements seems to induce inefficiencies in managerial investment decisions and hence inhibits firms from exploiting or replenishing their growth opportunities.

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“…The existing literature mainly uses innovation input or innovation output to measure corporate innovation performance [ 16 , 72 ]. our research only focuses on the impact of Internet penetration rate on innovation input (R&D investment).…”

Section: Discussionmentioning

confidence: 99%

Firm information disclosure environment and R&D investment: Evidence from Internet penetration

Wang

Khan

et al. 2021

PLoS ONE

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Guided by the conviction that “Clear waters and green mountains are as good as mountains of gold and silver”, China highly values sustainable economic and social development through innovation and Internet technology. Regression analysis is performed to examine the impact of corporate information disclosure environment proxied by the Internet penetration rate on innovation. Leveraging from the city-level Internet penetration rates data in China from 2003 to 2017, this study gets the following findings: (1) Firms headquartered in cities with high Internet penetration rates tend to be more innovative, i.e. they invest more in research and development. (2) This result is supported by several robustness checks, such as alternative measures of key variables, alternative empirical specifications, and tests to mitigate identification concerns. (3) "financing constraint" and "tolerance of innovation failure" are two channels that influence firms’ innovative endeavors. (4) Additional tests show that Internet penetration rates facilitate a firm’s output efficiency of innovation input, total factor productivity, and human capital environment for innovation. The above conclusions not only enrich the relevant literature on the influencing factors of corporate innovation from the perspective of the firm information disclosure environment but also provide an important reference for further understanding the positive role of macro technology development on social and economic development.

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SOX Section 404 and Corporate Innovation

Cited by 51 publications

References 58 publications

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

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

Disclosure, Firm Growth, and the JOBS Act

Firm information disclosure environment and R&D investment: Evidence from Internet penetration

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