Impact in Europe 1822

  • Hello,
    I am currently doing a research regarding the impact of SOX on EU companies’ shareholders. I have found a negative effect of the Act on EU companies’ stocks and I am trying to support a difference between US companies and EU ones. I am doing so in order to support a negative effect of SOX in EU companies’ shareholders, different than the effect in the US ones. I was focused on the ownership structure and the conflicts of interests and tried to base the difference in these factors. I would appreciate it if someone offered me some help, because i am really complicated.

  • Let me see. You are doing some research, but you already have your conclusion? :roll:

  • Hi and welcome 🙂
    I’d recommend searches like the following to gather related articles:
    Add ‘www’ and add to browser EU
    I’ll also share a few additional thoughts related to multi-national companies with home offices in Europe who must also comply with SOX regulations.
    It is difficult to see any positive benefits on any form of increased regulation. Certainly, SOX definitely adds to the cost of doing business and it’s subjective to interpretation at times (as it has to be generic to meet a wide range of industries).
    There are going to indeed be negative perceptions associated with SOX. The EU and USA are friendly competitors in the world economy and legal impositions by the USA to do business here might not be well received.
    With that backdrop, there are also intagible and tangible benefits with a proper implementation of SOX including:

    • Improved shareholder and investor confidence in the company’s valuation and share prices. Public company owership is by shareholders, so enhancing financial accuracy does create goodwill.

    • The company’s financial picture might be more accurate and clearer for senior management through the better accounting and control practices required to meet SOX requirements. Better decisions in investments and daily operations might result.

    • The company will most likely implement better fraud, IT security, and financial controls

    • Senior management must sign-off on the financial operating results and will be held personally liable if there are intentional misrepresentations.

    • SOX requirements require work, but they may not be difficult to implement for a company that is already well run and has tight financial and IT security controls.

    1. Using the Search button at the top, please enter Benefits as a keyword. You’ll get close to 75 entries in these forums
    2. If you’re in Europe, search the local phone directory and you might be able to very briefly interview someone in the financial area for a viewpoint.
      I believe that ‘Professor Denis’ might be challenging us to think outside the box that a well-done SOX implementation could have some benefits as well 😉 🙂

  • Let me see. You are doing some research, but you already have your conclusion? :roll:
    Yes, I have found a negative effect on EU companies. I have supported this via related literature, but I am also trying to justify a differect effect (negative) for EU companies than for US ones (positive).

  • If the negative effect is a negative cost- benefit ratio - I would attribute this to the difficulty in getting SOX training in the EU both for specialists and Ext auditors ( they are reliant on US colleagues flying over to communicate updates and provide training). In addition I find that as a CA, most of the Professional courses provided by the Institute of Chartered Accountants are aimed at limited scope subsidiaries reporting to the US, rather than FPIs which have their HQ SOX team in the EU (hence the reason I am so reliant on this forum).
    Perhaps another difficulty is that there are conflicts between some US laws and EU laws (e.g whistleblower acts?).
    Where the company is not obliged to be compliant with SOX, management may feel that there is no need to implement it as they are already required to comply with various Corporate Governance requirements within the EU.
    Could you provide us with detail as to what area the negativity has been identified? This may help us all in identifying the trend which has caused the difference.

  • I’m going to sound stupid but what do you mean by negative effect?
    Share prices ‘dropping’ because they are not favourably viewed compared to US where there are supposed tighter controls?
    Reduced dividends because of the impact of annual compliance costs eating away at the bottom line?
    Significant increases in IPOs in the European market as companies turn away from the US?
    Increase in risk to shareholders in the European market as companies seek to list there and avoid the requirements of US legislation?

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