 The impact of the Sarbanes-Oxley act on the cost of going publicChristoph Kaserer, Alfred Mettler and Stefan Obernberger No 2008-07, CEFS Working Paper Series from Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS) Abstract: This paper examines the impact of SOX on the total cost and the component cost of going public. First, we document a statistically significant increase in non-underwriting expenses of 0.8 percentage points after the introduction of SOX, which is mostly due to an increase in accounting and legal fees. Because of the fixed-cost character of this component cost, smaller issues show a much greater percentage increase than larger ones. Second, we demonstrate a highly significant reduction in underpricing in the magnitude of about 4 percentage points. This result is size-independent, and in accordance with the view that SOX reduces adverse selection costs. Third, we find that on average the total flotation costs have decreased between 3 and 3.5 percentage points in the post-SOX period. However, for smaller companies the reduction in underpricing does not compensate anymore for the increase in non-underwriting expenses (i.e., accounting and legal fees). Therefore, the positive impact of SOX on the costs of going public decreases with smaller offering sizes. Keywords: Sarbanes-Oxley; SOX; IPO; Going Public; Adverse Selection (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:cefswp:200807 Access Statistics for this paper More papers in CEFS Working Paper Series from Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS) Contact information at EDIRC. |
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