The Impact of the Sarbanes-Oxley Act on the Cost of Going PublicReport as inadecuate




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Business Research

, Volume 4, Issue 2, pp 125–147

First Online: 28 February 2014Received: 18 October 2010Accepted: 14 March 2011

Abstract

This paper examines the impact of the Sarbanes-Oxley Act SOX, a legal framework intended to increase transparency and accountability of listed companies, on the cost of going public in the US. We expect SOX to increase the direct cost of going public, but decrease the underpricing because of reduced asymmetric information. Our main results corroborate these hypotheses. First, we find an increase in the cost of going public of 90 bp of gross proceeds. Second, we record a reduction in underpricing of 6 pp, which is related to a reduced offer price adjustment. This supports our hypothesis that SOX represents a mechanism to reduce asymmetric information.

G18 G24 G32 Keywordsasymmetric information auditing and legal fees bookbuilding IPO flotation cost going public partial adjustment phenomenon propensity score matching selection bias SOX underpricing underwriting fees  Download to read the full article text



Author: Christoph Kaserer - Alfred Mettler - Stefan Obernberger

Source: https://link.springer.com/







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