The Sarbanes-Oxley Act of 2002: Implications for Market Efficiency and Analysts' Performance

The Sarbanes-Oxley Act, enacted as a response to the multiple cases of corporate fraud during the years 2001-2002, is considered to be one of the most important re-forms in the corporate disclosure policy with potentially far-reaching implications for the stock markets. This paper studies these implications for two major "Consumers" of information released by companies, namely investors and analysts. It was found that following the reform the US stock market is characterized by a significantly higher speed of adjustment to new information, suggesting that information is more rapidly incorporated in the stock prices by investors, thus, leading to an increase in informational market efficiency.