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Did the Sarbanes-Oxley Act of 2002 make Firms less Opaque? Evidence from Analyst Earnings Forecasts


Author Info

  • Stefan Arping

    (University of Amsterdam)

  • Zacharias Sautner

    (University of Amsterdam)


We study whether the Sarbanes-Oxley Act (SOX) of 2002 made firms less opaque. For identification, we use a difference-in-differences estimation approach and compare EU firms that are cross-listed in the US—and therefore subject to SOX—with comparable EU firms that are not cross-listed. We derive proxies for corporate opaqueness from analyst earnings forecasts. Our findings suggest that, relative to the control group, cross-listed firms became significantly less opaque after the implementation of SOX. We provide evidence that this effect was particularly pronounced for firms operating in informationally sensitive industries. We complement our analysis with a textual analysis of corporate annual reports in order to shed light on how SOX may have affected firms’ reporting behavior.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-129/2/DSF 5.

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Date of creation: 21 Dec 2010
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Handle: RePEc:dgr:uvatin:20100129

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Keywords: Sarbanes-Oxley Act; Analyst Forecasts; Corporate Governance; Disclosure Regulation;

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  1. Luzi Hail & Christian Leuz, 2006. "International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?," Journal of Accounting Research, Wiley Blackwell, vol. 44(3), pages 485-531, 06.
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