Download This PaperDid SOX Section 404 Make Firms Less Opaque? Evidence from Cross-Listed Firms
40 Pages Posted: 2 Mar 2010 Last revised: 30 Jan 2015
Date Written: August 1, 2012
Abstract
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.
Keywords: Sarbanes-Oxley Act, Analyst Forecasts, Corporate Governance, Disclosure Regulation
JEL Classification: G1, G3
Suggested Citation: Suggested Citation
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