Sox First

When Sarbanes-Oxley was introduced in 2002, it was supposed to enhance investor protection by improving the quality of information and increasing the transparency of corporations. Now a new study has found it's had the opposite effect on the quality of information.

The study, The Impact of the Sarbanes-Oxley Act on Information
Quality in Capital Markets by Joy Begley and Qiang Cheng from the university of british columbia and Yanmin Gao from the University of Alberta found that there was just a temporary improvement in the quality of information following the passage of Sarbanes-Oxley. But that was just a blip. By the second and third years, information quality declined. The study also found that there was an increase in errors of analyst forecasts.

The researchers argue that the prospect of bigger penalties for inaccurate or faulty disclosures would discourage managers from disclosing more.

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