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A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002

  • Yael V. Hochberg
  • Paola Sapienza
  • Annette Vissing-Jorgensen

We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behavior of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify the firms most affected by the law as those whose insiders lobbied against strict implementation, and compare their returns to the returns of less affected firms. Cumulative returns during the four and a half months leading up to passage of SOX were approximately 10 percent higher for corporations whose insiders lobbied against one or more of the SOX disclosure-related provisions than for similar non-lobbying firms. Analysis of returns in the post-passage implementation period indicates that investors' positive expectations with regards to the effects of the law were warranted for the enhanced disclosure provisions of SOX.

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File URL: http://www.nber.org/papers/w12952.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12952.

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Date of creation: Mar 2007
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Publication status: published as Yael V. Hochberg & Paola Sapienza & Annette Vissing-Jørgensen, 2009. "A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002," Journal of Accounting Research, Blackwell Publishing, vol. 47(2), pages 519-583, 05.
Handle: RePEc:nbr:nberwo:12952
Note: CF LE POL
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  1. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
  2. Nick Bloom & John Van Reenen, 2006. "Measuring and explaining management practices across firms and countries," LSE Research Online Documents on Economics 733, London School of Economics and Political Science, LSE Library.
  3. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance And Equity Prices," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 107-155, February.
  4. Lo, Kin, 2003. "Economic consequences of regulated changes in disclosure: the case of executive compensation," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 285-314, August.
  5. Vidhi Chhaochharia & Yaniv Grinstein, 2007. "Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules," Journal of Finance, American Finance Association, vol. 62(4), pages 1789-1825, 08.
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