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During 1980–2000, an average of 310 companies per year went public in the United States. Since 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in IPO activity. We find very little support for the conventional wisdom, and we offer an alternative explanation. Our economies of scope hypothesis posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm.

Using eight thousand public companies, we study the impact of the Sarbanes-Oxley Act (SOX) of 2002 and other contemporary reforms on directors and boards, guided by their impact on the supply and demand for directors. SOX increased directors' workload and risk (reducing the supply), and increased demand by mandating that firms have more outside directors. We find both broad-based changes and cross-sectional changes (by firm size). Board committees meet more often post-SOX and Director and Officer (D&O) insurance premiums have doubled. Directors post-SOX are more likely to be lawyers/consultants, financial experts, and retired executives, and less likely to be current executives. Post-SOX boards are larger and more independent. Finally, we find significant increases in director pay and overall director costs, particularly among smaller firms.

This paper exploits a natural quasi-experiment to isolate the effects that were uniquely due to the Sarbanes—Oxley Act (SOX): U.S. firms with a public float under $75 million could delay Section 404 compliance, and foreign firms under $700 million could delay the auditor's attestation requirement. As designed, Section 404 led to conservative reported earnings, but also imposed real costs. On net, SOX compliance reduced the market value of small firms.

This article aims to provide a thorough analysis of the evolution of the company, starting from the inception of the first public company in the seventeenth century, namely the United East India Company (VOC), until the modern expression of a novel form of cash-shell company that in recent years has taken Wall Street by storm: the Special Purpose Acquisition Company (SPAC). As opposed to common wisdom that would like to compare the SPAC to England’s South Sea Bubble of 1720, the paper argues that both the VOC and the SPAC have remarkable similarities by virtue of sharing one of the most important corporate features: ‘venturing beyond’ for special purposes, and being the instruments through which the dreams of entrepreneurs can be realised.

ABSTRACT Objective: the Three-Century-Old Public Company (EPT) is a federal public organization with over three centuries of history. Its main products, banknotes and coins, are being replaced by technological advancements in payment methods. To maintain its relevance in Brazilian society, the organization needs to develop a focus on innovation. EPT has already undertaken initiatives aimed at fostering innovation, but it is understood that to maintain its excellence, the organization will need to implement and sustain a culture of innovation.The objective of this article is to develop an intervention proposal for implementing a culture of innovation in a public company by identifying the challenges and benefits of change as anticipated by the organization's leaders. Method: an organizational culture diagnosis of EPT was conducted using both quantitative and qualitative data collection and analysis, including the application of the OCAI Instrument with 71 respondents, complemented by nine in-depth interviews with the company’s leaders. Results: based on the leadership’s interest in transforming the organizational culture, the study proposed the creation of an ‘Innovative Culture’ committee and an action plan consisting of five steps for implementing a new culture of innovation. Conclusion: this article may serve as a reference for future studies in public companies needing to implement cultural changes. RESUMO Objetivo: a Empresa Pública Tricentenária (EPT) é uma organização pública federal de mais de três séculos de história cujos principais produtos, cédulas e moedas, estão sendo substituídos pelas evoluções tecnológicas dos meios de pagamentos. Para manter sua relevância na sociedade brasileira a organização precisa desenvolver um foco em inovação. A EPT já apresentou iniciativas voltadas para o incentivo de inovações, mas entende-se que para manter seu desempenho de excelência a organização precisará implantar e manter uma cultura de inovação. O objetivo deste artigo é desenvolver uma proposta de intervenção para implantação de uma cultura de inovação em uma empresa pública a partir da identificação dos desafios e benefícios da mudança esperados pelos líderes da organização. Método: foi realizado um diagnóstico da cultura organizacional da EPT a partir de coleta e análise de dados quantitativos e qualitativos, sendo compostos pela aplicação do Instrumento OCAI com 71 respondentes e complementada com nove entrevistas em profundidade com os líderes da empresa. Resultados: a partir do interesse das lideranças por transformações na cultura organizacional, o estudo propôs a criação do comitê ‘Cultura Inovadora” e um plano de ação com cinco passos para implantação de uma nova cultura para inovação. Conclusões: este artigo pode ser uma referência para estudos futuros em empresas públicas que necessitem implantar uma mudança na cultura organizacional.

INTRODUCTION The Securities Act of 1933 (\"Securities Act\") provides that companies registering securities for sale in the U.S. must use independent auditors to opine on the financial statements presented by management to potential investors.1 The Securities Exchange Act of 1934 (\"Exchange Act\") further entrenches the accounting profession in federal securities regulation by requiring that companies trading in U.S. markets regularly provide financial information that has been examined by independent, outside auditors.2 Prior to the passage of the Sarbanes-Oxley Act of 2002, the accounting profession had primary responsibility for overseeing the audits of public companies.3 Private, voluntary accountant membership associations-the American Institute of Accountants (\"AIA\") and its successor, the American Institute of Certified Public Accountants (\"AICPA\")-engaged in standard setting and monitoring of public company auditors in close cooperation with the U.S. Securities and Exchange Commission (\"SEC\" or \"Commission\").4 The reliability of this system of self-regulation was questioned in the 1970s amid concerns about bribery and undisclosed slush funds,5 and again in the 1980s after revelations that the audit industry was willing to provide unqualified opinions on the reliability of financial statements despite knowing that a previous auditor had refused to do so.6 In response to these concerns, the AICPA tightened the reins on public company auditors by adopting additional standards in response to perceived gaps in audit quality and mandating participation in regular peer reviews of audits performed by audit firms.7 Yet, public company auditors persisted in allying with corporate management, constructing and/or supporting alternate universe accounting approaches that bore little semblance to economic reality. By 2002, public confidence in auditors of public companies shattered after revelations of financial fraud at major corporations generated substantial losses in investment and retirement accounts of ordinary Americans.8 Malcontent over the betrayal of these gatekeepers flowed to the steps of the Capitol.9 In 2002, House and Senate legislators proposed a host of bills to curb incidents of auditors' failure to disclose to the public that the financial statements they had audited were inconsistent with generally accepted accounting principles.10 In autopsying the self-regulatory regime for public company auditors, many noted inadequate SEC funding to properly enforce audit standards, and the lack of capacity at state boards of accountancy for enforcement of audit standards.11 The majority of bills proposed in response to the financial scandals at the turn of the twenty-first century contemplated the creation of new oversight bodies with the ability to enforce securities laws, sharing enforcement responsibility with the SEC.12 When congressional support coalesced around The Public Company Accounting Reform and Investor Protection Act, the George W. Bush administration issued a statement expressing concern about a number of its provisions, including those that empowered the proposed oversight board with the ability to enforce securities law violations.13 The statement expressed concern that delegating such powers to the proposed regulatory body would \"create duplicative and competing authority between the board and the SEC, jeopardizing rigorous enforcement of legal and professional standards. [...]it identifies a synergistic allocation of disciplinary activity regarding regulated auditors. A. Policing Auditors in the Pre-Sarbanes-Oxley Act Era The SEC initially worked in coordination with the AIA, predecessor to the AICPA, to develop rules and processes for accountants while implementing the core provisions of the Securities Act and the Securities Exchange Act.30 Accountants auditing public companies were charged with writing reports on the reliability of the financial statements they had reviewed.31 The Commission was initially inclined to specify a format for this auditor's certification, but after considering the views of the accounting profession, it determined to allow the auditor to choose the wording of the auditor report, and reserved for itself the responsibility of establishing its content.32 Although the reports issued by accounting firms were relatively vague as to the basis for such certifications, the SEC pursued enforcement action against auditors where it saw evidence of poorly prepared financial statements or unfollowed audit procedures.33 For example, the SEC brought an action against outside auditors in 1935 for issuing an unqualified opinion on the financial statements of a mining company that used generous property valuation estimates, despite knowing that the application of various other testing methodologies would have indicated that the property had a significantly lower value than was presented in the financials.34 The Commission's inclination to give a wide berth to the auditing of public companies abruptly ended in 1940, when a trio of con men gained control of a pharmaceutical company, McKesson & Robbins, Inc., and perpetrated an extensive fraud by creating a detailed paper trail of nonexistent inventory.35 After revelation of this fraud, and the highly publicized suicide of its main perpetrator, the AIA reacted by recommending that auditors perform a physical inspection of inventory.36 The Commission echoed that recommendation and, further, took steps to revamp the auditor's report by mandating the inclusion of certain representations therein.37 The McKesson scandal was the first major

The primary goal of the SarbanesOxley Act was to fix auditing of U.S. public companies, consistent with its full, official name: the Public Company Accounting Reform and Investor Protection Act of 2002. By consensus, auditing had been working poorly, and increasingly so. The most important, and most promising, part of SarbanesOxley was the creation of a unique, quasi-public institution to oversee and regulate auditing, the Public Company Accounting Oversight Board (PCAOB). In controversial section 404, the law also created new disclosure-based incentives for firms to spend money on internal controls, above increases that would have occurred after the corporate scandals of the early 2000s. In exchange for these higher costs, which have already fallen substantially, SarbanesOxley promises a variety of long-term benefits. Investors will face a lower risk of losses from fraud and theft, and benefit from more reliable financial reporting, greater transparency, and accountability. Public companies will pay a lower cost of capital, and the economy will benefit because of a better allocation of resources and faster growth. SarbanesOxley remains a work in progress -- section 404 in particular was implemented too aggressively - but reformers should push for continued improvements in its implementation, by PCAOB, rather than for repeal of the legislation itself.

PurposeValuers should independently assess market value. The purpose of this article is to analyze whether the valuation behavior remains independent when commissioned by publicly listed companies in Taiwan.Design/methodology/approachThis study used both quantitative and qualitative methods. Quantitative data analysis was used to examine the estimated premium ratio and estimated divergent ratio with the independent sample t test and Wilcoxon-Mann-Whitney test. To complement and validate the quantitative analysis, open-ended questionnaires were conducted, providing additional insights into the research findings.FindingsThe results showed that there is a significant difference in estimated valuations commissioned by representatives of buyers and sellers, and the estimated premium ratios commissioned by representatives of buyers were higher than those of sellers. Furthermore, the open-ended questionnaires results indicate that these findings may be influenced by clients for less experienced appraisers. However, for senior appraisers, this is seen as an action to gain a better understanding of the valuation purpose and always within a reasonable price range. In addition, client influence is not a static factor; it may transform into the valuer's behavior as the appraiser's experience grows and deepens.Practical implicationsIt is difficult to obtain valuation reports commissioned by representatives of both buyers and sellers for the same property transactions. In this study, data were obtained from the Market Observation Post-System (MOPS) in Taiwan. As valuation reports could not be obtained, estimated valuations and transaction prices are used to calculate estimated premium ratio and estimated divergent ratios.Originality/valuePrevious investigations of the client effect have been conducted using qualitative methods including questionnaire surveys, in-depth interviews and experimental design. However, these studies are subject to moral hazard. This study may be the first study that has access to data on valuations for both buyers and sellers in such a formal setting.

Because internal control audits never existed before the passage of the Sarbanes-Oxley Act (SOX), and these audits simultaneously became mandatory for all U.S. accelerated filer companies, it has been difficult to assess the extent of investor demand for these audits. To understand whether investors demand internal control audits for these large companies, we exploit a regulatory exemption that permits companies to exclude acquired operations from an internal control audit. Using this voluntary setting, we find that investors react negatively if a company excludes acquired operations from their internal control audit. This negative reaction is larger when more of the company's operations are excluded from audit and when there is greater information uncertainty. Further, companies that exclude acquired operations from internal control audits are more likely to have a subsequent restatement. Collectively, these findings are consistent with investors perceiving value in (i.e., demanding) internal control audits for large U.S. public companies.

Purpose To maintain auditor independence, Section 201 of the Sarbanes–Oxley Act of 2002 (SOX) imposes restrictions on audit firms in rendering management advisory services (MASs) to audit clients. Responding to the requirement, audit firms establish a strategic alliance with consulting companies to expand their scope of services to alleviate the impairment of auditor independence. Taiwan follows the spirit of SOX in related laws and regulations. To investigate the effects of SOX on Taiwanese auditing industry, this study aims to examine the relationship between MASs and operating performance of audit firms. Design/methodology/approach This study obtains empirical data from the 1989–2017 Survey Report of Audit Firms in Taiwan, published by the Financial Supervisory Commission (FSC). FSC administers the survey across all registered audit firms annually to collect business information on the auditing industry for macro-economic analysis and industrial policy development. The authors group audit firms into three categories: national, regional and local firms. Based on the structure-conduct-performance (S-C-P) theoretical framework, this study establishes the following cross-sectional regression equation to test the authors’ hypotheses. Findings Main results indicate that national firms have better post-SOX firm and alliance performance. Both firm and alliance MASs contribute more to the performance of national firms after SOX. Practical implications This study claims that national firms establish alliance with consulting companies for resource sharing but regional and local firms for tax-saving. Originality/value Consistent with the economic theory of regulation and resource-based theory, SOX matters in Taiwan.