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Tuesday, October 16, 2007

Sarbanes-Oxley = a downturn in corporate risk-taking

For all its noble intentions, the five-year-old Sarbanes-Oxley Act prompts many complaints from the corporate community. It has been blamed (wrongly, in most cases) for prompting companies to shun public listings in New York. Executives complained about the cost of compliance, and the potential for liability. Then they turned around and decided it wasn’t so bad after all.

Now, two academic studies commissioned by the American Enterprise Institute conclude that SOX, as it’s fondly known, has reduced the corporate risk-taking that produces economic growth. One study led by Professor Kenneth Lehn at the University of Pittsburgh compared 4000 US companies with close to 1000 similar companies in the UK , concluding that the U.S. players were more risk-averse.

Sarbanes-Oxley = a downturn in corporate risk-taking

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