The Impact of the Sarbanes-Oxley Act on US companies 2779
snasiraly last edited by
I am new in this Area and would appreciate some help. I am writing my dissertation and need some info. How do I Analyze the impact of the SOX on the share prices of the US firms and calculate the abnormal returns. Any help would be greatly appreciated.
gmerkl last edited by
If you can choose the topic of your dissertation or if you can change the topic of your dissertation, I would strongly recommend to choose a different topic or to change the topic to a different topic.
The Sarbanes-Oxley Act contains of many individual articles with different provisions that affect companies in different ways and that have different dates when compliance became mandatory.
In addition, there are many other factors that affect share prices and thus the returns. In order to isolate the effects of provisions of the Sarbanes-Oxley Act you would need to include all those other factors as control variables in a multiple regression model. Obtaining the data for these control variables will sometimes be impossible or very time consuming. It will get very complex and there is danger that you will not be able to properly isolate the effect of SOX provisions on the share price.
In my opinion, the share price is not a suitable object to measure the impact of regulatory provisions because it is a very indirect and remote measure and because it is primarily influenced by many other factors.
It is already quite difficult to isolate the effect of SOX provisions (e.g. section 404) on more direct measures such as the number of restatements of historical financial statements because of fraud or error from all other factors that have an influence on restatements.