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BuR - Business Research

BuR - Business Research
Official Open Access Journal of VHB - Verband der Hochschullehrer für Betriebswirtschaft e.V.
German Academic Association for Business Research

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The Impact of the Sarbanes-Oxley Act on the Cost of Going Public

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.

Keywords

URN: urn:nbn:de:0009-20-32074

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Any party may pass on this Work by electronic means and make it available for download under the terms and conditions of the authorcontract. The text of the license may be accessed and retrieved via Internet at no url given

Recommended citation

Kaserer C, Mettler A, Obernberger S (2011). The Impact of the Sarbanes-Oxley Act on the Cost of Going Public. BuR - Business Research, Vol. 4, Iss. 2, pp. 125-147, URN: urn:nbn:de:0009-20-32074

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