Sarbanes-Oxley and corporate risk-taking

Leonce L. Bargeron, Kenneth M. Lehn and Chad J. Zutter

Journal of Accounting and Economics, 2010, vol. 49, issue 1-2, 34-52

Abstract: We empirically examine whether risk-taking by publicly traded US companies declined significantly after adoption of the Sarbanes-Oxley Act of 2002 (SOX). Several provisions of SOX are likely to discourage risk-taking, including an expanded role for independent directors, an increase in director and officer liability, and rules related to internal controls. We find several measures of risk-taking decline significantly for US versus non-US firms after SOX. The magnitudes of the declines are related to several firm characteristics, including pre-SOX board structure, firm size, and R&D expenditures. The evidence is consistent with the proposition that SOX discourages risk-taking by public US companies.

Keywords: Sarbanes-Oxley; Legislative; policy; Corporate; risk-taking; Investment; policy (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (152)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:49:y:2010:i:1-2:p:34-52

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