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Has Section 404 of the Sarbanes-Oxley Act Discouraged Corporate Risk-Taking? New Evidence from a Natural Experiment
Social Science Research Network
Prior studies conclude that one of the unintended consequences of complying with Section 404 of the Sarbanes-Oxley Act (SOX404) is a lower level of corporate risk-taking activities. However, some argue that firms complying with SOX404 benefitted from more reliable financial statements, greater transparency, and lower cost of capital, resulting in more risk-taking investments. We use the discontinuity requirement introduced by SOX404 to construct a natural experiment that isolates its effects.doi:10.2139/ssrn.1997228 fatcat:4ic7qplhe5eq3dtcioy7md7c2y