The Impact of SOX on the Dual-Class Voting Premium

51 Pages Posted: 19 Nov 2018 Last revised: 28 Nov 2018

See all articles by Feng Gao

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Ivy Zhang

University of California, Riverside

Date Written: November 9, 2018

Abstract

We examine the impact of corporate governance laws on the private benefits of control, using the enactment of the Sarbanes-Oxley Act of 2002 (SOX) as a natural quasi-experiment. We find a large decline in the average voting premium of U.S. dual-class firms targeted by major SOX provisions that enhance board independence, improve internal controls and increase litigation risks. These targeted firms also improve the efficiency of investment, cash management, and CEO compensation. Overall, the evidence suggests that SOX is effective in curbing the private benefits of control.

Keywords: Private Benefits of Control, Voting Premium, Corporate Governance, Sarbanes-Oxley Act (SOX)

JEL Classification: G38, K22, G32

Suggested Citation

Gao, Feng and Zhang, Ivy, The Impact of SOX on the Dual-Class Voting Premium (November 9, 2018). Journal of Law and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3281881

Feng Gao (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

Ivy Zhang

University of California, Riverside ( email )

900 University Ave
Riverside, CA 92521
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
77
Abstract Views
401
rank
343,893
PlumX Metrics