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A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002

68 Pages Posted: 22 May 2008  

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business

Multiple version iconThere are 4 versions of this paper

Date Written: March 2007

Abstract

We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behaviour of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favour of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify the firms most affected by the law as those whose insiders lobbied against strict implementation, and compare their returns to the returns of less affected firms. Cumulative returns during the four and a half months leading up to passage of SOX were approximately 10 percent higher for corporations whose insiders lobbied against one or more of the SOX disclosure-related provisions than for similar non-lobbying firms. Analysis of returns in the post-passage implementation period indicates that investors' positive expectations with regards to the effects of the law were warranted for the enhanced disclosure provisions of SOX.

Keywords: Corporate Governance, Sarbanes Oxley Act

JEL Classification: G34, K22

Suggested Citation

Hochberg, Yael V. and Sapienza, Paola and Vissing-Jorgensen, Annette, A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002 (March 2007). , Vol. , pp. -, 2007. Available at SSRN: https://ssrn.com/abstract=1135443

Yael V. Hochberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States
847-491-7436 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of California Berkeley, Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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