The Robustness of the Sarbanes Oxley Effect on the U.S. Capital Market

This paper re-evaluate the effects of the Sarbanes Oxley Act (SOX) on the number of exchange-traded firms in the U.S. capital market, taking into account general market conditions and firm fundamentals, especially size and financial performance. Recent accounting research (such as Engel, Hayes, and Wang [2007] ("EHW") and Leuz, Triantis, and Wang [2008] ("LTW")) documents an association between the enactment of SOX and an increase in the incidence of firms going private and going dark. Going private and going dark are two ways for firms to cease reporting to the SEC, and therefore to escape the costs associated with the corporate governance, auditing, and disclosure mandates of SOX.