The Sarbanes Oxley Act of 2002: Implications for Compensation Contracts and Managerial Risk- Taking
نویسنده
چکیده
We document that the period following the passage of the Sarbanes Oxley Act of 2002 (SOX) is associated with a significant reduction in compensation-based incentives to take risk, which is related to a decline in risky investments. Moreover, consistent with the rules in SOX directly affecting CEOs’ incentives to take risk, we document that the decline in risky investments exceeds the amount that would be expected from changes in compensation packages alone. Finally, we document that these effects are robust to controlling for the market decline in 2000/2001 as well as the passage of SFAS 123R.
منابع مشابه
The Sarbanes Oxley Act of 2002: Implications for Compensation Structure and Risk-Taking Incentives of CEOs
This paper investigates the effect of the Sarbanes-Oxley Act (hereafter, SOX) on the compensation structure and the risk-taking incentives of CEOs as revealed by their research and development expenses and capital expenditures. We hypothesize that firms will respond to the additional liability imposed by SOX on corporate executives by altering the mix of incentive compensation to fixed salary a...
متن کاملShareholder Wealth Effects of MANAGEMENT Regulatory COMPLIANCE
Purpose: This paper addresses whether and how the Sarbanes-Oxley Act of 2002(SOX) affects shareholder wealth (firm value) by focusing on the trade-off between improved corporate governance leading to a lower cost of capital and increased managerial compliance costs of regulations. Design/Methodology: We use an analytical model of solving the management utility maximization function and the cha...
متن کاملPart 1980—procedures for the Handling of Discrimination Complaints under Section 806 of the Corporate and Criminal Fraud Account- Ability Act of 2002, Title Viii of the Sarbanes-oxley Act
(a) This part implements procedures under section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002 (‘‘Sarbanes-Oxley’’ or ‘‘Act’’), enacted into law July 30, 2002. Sarbanes-Oxley provides for employee protection from discrimination by companies and representatives of companies because the employee has engaged in protected activity ...
متن کاملDiscussion of A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002
=1204442. DUARTE, J.; K. KONG; L. A. YOUNG; AND S. SIEGEL. “Foreign Listings, U.S. Equity Markets, and the Impact of the Sarbanes-Oxley Act, 2007. Working paper, University of Washington, 2007. ENGEL, E.; R. M. HAYES; AND X. WANG. “The Sarbanes–Oxley Act and Firms’ Going-Private Decisions.” Journal of Accounting & Economics 44 (2007): 116–45.FAMA, E., AND K. FRENCH. “Common Risk Factors in ...
متن کاملOpen Access Andersen v. U.S.: Policy Implications and a Social Science Research Agenda
The U.S. Supreme Court overturned the conviction of Arthur Andersen, LLP for its involvement in the Enron scandal. The Court held that that the jury instructions did not accurately convey the meaning of the witness tampering statute that Andersen was charged with. Since the original trial, relevant sections of the Criminal Code were updated with the passage of the Sarbanes-Oxley Act (2002). Alt...
متن کامل