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; Interdisciplinary Center (IDC) Herzliyah

Gustavo Grullon


Rice University - Jesse H. Jones Graduate School of Business

Roni Michaely


Johnson@Cornell Tech, Cornell University; Interdisciplinary Center (IDC)

November 23, 2015

Forthcoming, Management Science
AFA 2013 San Diego Meetings Paper
Johnson School Research Paper Series No. 18-2012

Abstract:     
We use the Sarbanes Oxley Act (SOX) as a quasi-natural experiment to examine the link between product market competition and internal governance mechanisms. Consistent with notion that competition plays an important role in aligning incentives within the firm, SOX led to a larger improvement in the operation of firms in concentrated industries than in non-concentrated industries. Further, within concentrated industries, the effect is especially pronounced among firms with weaker governance mechanisms prior to SOX. We corroborate these findings using two additional regulatory changes in the U.S. and abroad. Overall, our results indicate that corporate governance is more important when firms face less product market competition.

Number of Pages in PDF File: 45

Keywords: Corporate Governance, Product Market Competition, Sarbanes Oxley

JEL Classification: G34, G38


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Date posted: March 20, 2012 ; Last revised: November 24, 2015

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 (November 23, 2015). Forthcoming, Management Science; Johnson School Research Paper Series No. 18-2012. 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)

Interdisciplinary Center (IDC) Herzliyah ( email )
P.O. Box 167
Herzliya, 46150
Israel
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
Johnson@Cornell Tech, Cornell University ( email )
111 8th Avenue #302
New York, NY 10011
United States
Interdisciplinary Center (IDC)
P.O. Box 167
Herzliya, 46150
Israel
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