Title: Corporate governance, compliance and valuation effects of Sarbanes-Oxley on US and foreign firms

Authors: Lorne N. Switzer, Hui Lin

Addresses: Finance Department, John Molson School of Business, Concordia University, 1455 De Maisonneuve Blvd. W., Montreal, Quebec, H3G 1M8, Canada. ' Finance Department, John Molson School of Business, Concordia University, 1455 De Maisonneuve Blvd. W., Montreal, Quebec, H3G 1M8, Canada

Abstract: This paper examines the longer-term corporate governance, compliance and valuation implications of Sarbanes-Oxley Act of 2002 (SOX) on US and foreign firms. Significant benefits of SOX are shown, particularly for small companies and US-traded foreign companies, although disproportional compliance costs are shown for the former. Firms that are less compliant with the legislation experience relatively higher abnormal returns, supporting the hypothesis that relaxing compliance constraints is value enhancing. Long-term abnormal returns are negatively related to board independence and CEO duality, but are positively related to the ownership by insiders and institutional investors.

Keywords: corporate governance; Sarbanes-Oxley compliance; long-term abnormal returns; valuation; US firms; foreign firms; USA; United States.

DOI: 10.1504/IJBGE.2009.023791

International Journal of Business Governance and Ethics, 2009 Vol.4 No.4, pp.400 - 426

Published online: 11 Mar 2009 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article