Going-Private Decisions and the Sarbanes-Oxley Act of 2002: A Cross-Country Analysis

This article investigates whether the passage and the implementation of the Sarbanes-Oxley Act of 2002 (SOX) drove firms out of the public capital market. To control for other factors affecting exit decisions, we examine the post-SOX change in the propensity of American public targets to be bought b...

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Bibliographic Details
Published in:Journal of law, economics, & organization economics, & organization, 2009-05, Vol.25 (1), p.107-133
Main Authors: Kamar, Ehud, Karaca-Mandic, Pinar, Talley, Eric
Format: Article
Language:English
Subjects:
Audit committees
Business management
Business structures
Capital expenditures
Capital market
Capital markets
Correlation analysis
Economics
Going private
Legislation
P values
Private investment
Privatization
Public capital
Public Company Accounting Reform & Investor Protection Act 2002-US
Public market
Securities issues
Securities markets
Size of enterprise
Standard error
Stock exchanges
Stock market indices
Stock markets
Studies
Target acquisitions
U.S.A
Variable coefficients
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Summary:This article investigates whether the passage and the implementation of the Sarbanes-Oxley Act of 2002 (SOX) drove firms out of the public capital market. To control for other factors affecting exit decisions, we examine the post-SOX change in the propensity of American public targets to be bought by private acquirers rather than public ones with the corresponding change for foreign public targets, which were outside the purview of SOX. Our findings are consistent with the hypothesis that SOX induced small firms to exit the public capital market during the year following its enactment. In contrast, SOX appears to have had little effect on the going-private propensities of larger firms. (JEL G30, G34, G38, K22)
ISSN:8756-6222
1465-7341
DOI:10.1093/jleo/ewn019