Abstract

http://ssrn.com/abstract=2024733
 
 

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Product Market Competition and Internal Governance: Evidence from the Sarbanes Oxley Act


Vidhi Chhaochharia


University of Miami

Yaniv Grinstein


Cornell University - Samuel Curtis Johnson Graduate School of Management

Gustavo Grullon


Rice University - Jesse H. Jones Graduate School of Business

Roni Michaely


Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC)

July 1, 2012

Johnson School Research Paper Series No. 18-2012
AFA 2013 San Diego Meetings Paper

Abstract:     
We use the Sarbanes Oxley Act (SOX) as a natural experiment of a shock to internal governance to examine the link between product market competition and internal governance mechanisms. Consistent with the notion that product market competition is a close substitute for internal governance, we find that firms in concentrated industries experienced a larger improvement in operational efficiency after the approval of SOX than did firms in non-concentrated industries. These gains in efficiency appear to come from a significant reduction in production and administrative costs. Several robustness tests confirm that our main results are not driven by unobservable factors unrelated to changes in corporate governance.

Number of Pages in PDF File: 39

Keywords: Corporate Governance, Product Market Competition, Sarbanes Oxley

JEL Classification: G34, G38

working papers series





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Date posted: March 20, 2012 ; Last revised: July 21, 2012

Suggested Citation

Chhaochharia, Vidhi and Grinstein, Yaniv and Grullon, Gustavo and Michaely, Roni, Product Market Competition and Internal Governance: Evidence from the Sarbanes Oxley Act (July 1, 2012). Johnson School Research Paper Series No. 18-2012; AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2024733 or http://dx.doi.org/10.2139/ssrn.2024733

Contact Information

Vidhi Chhaochharia
University of Miami ( email )
514 Jenkins Building
Miami, FL 33124
United States
Yaniv Grinstein (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Gustavo Grullon
Rice University - Jesse H. Jones Graduate School of Business ( email )
P.O. Box 2932
Houston, TX 77252-2932
United States
(713) 348-6138 (Phone)
(713) 348-6331 (Fax)
HOME PAGE: http://www.ruf.rice.edu/~grullon/
Roni Michaely
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
431 Sage Hall
Ithaca, NY 14853
United States
607-255-7209 (Phone)
607-254-4590 (Fax)
HOME PAGE: http://www.johnson.cornell.edu/faculty/profiles/Michaely/
Interdisciplinary Center (IDC)
P.O. Box 167
Herzliya, 46150
Israel
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