Analysis of Investment Opportunities in a Post-SOX World

Abstract

Considerable analysis has already been done regarding the pros and cons of the Sarbanes-Oxley Act (SOX). This paper adds to the literature by analyzing a population of 114 companies who disclosed material weaknesses in internal control pursuant to SOX. Analysis focused on four key areas: calculation of market returns for companies not in compliance with SOX; assessment of risk associated with investing in companies not in compliance with SOX; examination of M&A opportunities for companies not in compliance with SOX; review of evidence of companies "going dark" after disclosing non-compliance with SOX. the results of the analyses were eye-opening leading the authors to the conclusion that there is life and in investment opportunity after SOX.