Think-tank claims Sox has 'reduced risk taking in US'
PITTSBURGH - The Sarbanes-Oxley Act (Sox) has led to a significant drop in risk-taking behaviour by US firms compared to their UK counterparts since the inception of the accounting law, says major new research. In a report, Sarbanes-Oxley and Corporate Risk-Taking , researchers from the Katz School of Business at the University of Pittsburgh investigated three distinct measures of risk-taking to conclude: "Sox has chilled risk-taking by US corporations."
The report, which used 16-year old data and sampled 5,228 UK and US firms, looked at accounting-based risk measures in relation to research and development (R&D) and capital expenditure. It measured stock-based risk and found a decrease in market risk, equity risk and firm-specific risk since Sox, compared with UK counterparts. The largest decline was seen in high risk, R&D-intensive industries. Using a sample of initial public offerings (IPO) from 1990 to 2006, the report concluded: "The
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