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

Yael V. Hochberg, Paola Sapienza, Annette Vissing-Jorgensen

NBER Working Paper No. 12952
Issued in March 2007
NBER Program(s):Corporate Finance, Law and Economics, Political Economy

We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behavior of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favor 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.

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Document Object Identifier (DOI): 10.3386/w12952

Published: Yael V. Hochberg & Paola Sapienza & Annette Vissing-Jørgensen, 2009. "A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002," Journal of Accounting Research, Blackwell Publishing, vol. 47(2), pages 519-583, 05. citation courtesy of

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