Unintended Consequences of Granting Small Firms Exemptions from Securities Regulation: Evidence from the Sarbanes-Oxley Act
63 Pages Posted: 30 Apr 2009
Date Written: 2008-11-13
Economists have long recognized that government regulations often generate unintended consequences.1 The initial Securities Act of 1933 and the Securities Exchange Act of 1934 exempted small firms from certain filing requirements. The SEC expanded these exemptions in implementing the Sarbanes Oxley Act of 2002 (SOX). Beyond securities regulations, numerous statutory and regulatory exemptions exist for small businesses (Bradford, 2004). This paper presents evidence that exempting small firms from restrictive regulatory requirements (SOX in this case) generates the unintended consequence of creating incentives for some of these firms to remain small.
Suggested Citation: Suggested Citation