Publication Type

Journal Article

Publication Date

3-2011

Abstract

The Sarbanes-Oxley Act (SOX) was passed in the wake of several scandals that rocked corporate America in 2001 and 2002. The objective behind SOX was to improve corporate governance by improving accounting disclosures. Compliance with Section 404 is considered by many to be the most costly requirement of SOX and has been argued to be a disproportionate burden for small firms. Consequently, firms with a public float below $75 million were granted several exemptions from compliance. We document an unintended effect of these exemptions: a weakening of corporate governance through a weakening of the market for corporate control.

Keywords

Compliance costs, Business structures, Premiums, Leverage, Cash, Corporate governance, Target acquisitions, Market capitalization, Acquisition costs, Securities and Exchange Commission regulation

Discipline

Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Institutional and Theoretical Economics

Volume

167

Issue

1

First Page

149

Last Page

164

ISSN

0932-4569

Publisher

Mohr Siebeck

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://www.jstor.org/stable/25801335

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