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Sarbanes-Oxley and corporate risk-taking

Author

Listed:
  • Bargeron, Leonce L.
  • Lehn, Kenneth M.
  • Zutter, Chad J.

Abstract

We empirically examine whether risk-taking by publicly traded US companies declined significantly after adoption of the Sarbanes-Oxley Act of 2002 (SOX). Several provisions of SOX are likely to discourage risk-taking, including an expanded role for independent directors, an increase in director and officer liability, and rules related to internal controls. We find several measures of risk-taking decline significantly for US versus non-US firms after SOX. The magnitudes of the declines are related to several firm characteristics, including pre-SOX board structure, firm size, and R&D expenditures. The evidence is consistent with the proposition that SOX discourages risk-taking by public US companies.

Suggested Citation

  • Bargeron, Leonce L. & Lehn, Kenneth M. & Zutter, Chad J., 2010. "Sarbanes-Oxley and corporate risk-taking," Journal of Accounting and Economics, Elsevier, vol. 49(1-2), pages 34-52, February.
    • Handle: RePEc:eee:jaecon:v:49:y:2010:i:1-2:p:34-52
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    References listed on IDEAS

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