The Sarbanes-Oxley Act, industrial innovation, and real option creation
AbstractWe look at the effect of the US Sarbanes-Oxley (SOX) financial regulation on industrial innovation. Our theoretical framework shows it creating immediate uncertainty about its costs and future resolution of cost and managerial performance uncertainty. Real option value is created for investment delay. We construct a panel of patenting data and fit our model to it. We find a dip in patenting after SOX and subsequent medium term recovery, with larger dips for small, risky, and new companies. In the medium term, these companies continue to have relatively lower patenting. Like SOX, the dynamic behaviour is found only to apply to US companies. Our results have implications for policy and analysis.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49173.
Date of creation: 19 Aug 2013
Date of revision:
Innovation; Patents; Sarbanes-Oxley; Regulation; Real options;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-INO-2013-08-31 (Innovation)
- NEP-IPR-2013-08-31 (Intellectual Property Rights)
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