Did SOX Section 404 Make Firms Less Opaque? Evidence from Cross-Listed Firms
University of Amsterdam Business School; Tinbergen Institute
Frankfurt School of Finance & Management gemeinnützige GmbH
August 1, 2012
Contemporary Accounting Research, 30, 2013, 1133–1165
We study whether Section 404 of the Sarbanes-Oxley Act of 2002 made cross-listed firms less opaque via an examination of analyst earnings forecasts. To test this, we compare European Union (EU) firms that are cross-listed in the US — and therefore subject to S404 — with comparable EU firms that are not cross listed. We find that while both types of firms experienced a decrease in opaqueness over time, this decrease was significantly larger for cross-listed firms. Our results are robust to accounting for concurrent sell-side analyst regulations in the US, delistings, and changes in corporate risk taking. Overall, our analysis suggests that SOX had a positive effect on corporate disclosure quality.
Number of Pages in PDF File: 40
Keywords: Sarbanes-Oxley Act, Analyst Forecasts, Corporate Governance, Disclosure Regulation
JEL Classification: G1, G3
Date posted: March 2, 2010 ; Last revised: January 30, 2015
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