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Bucknell, Class, Research, White Paper, Writing

SOX causes Companies to go Dark


Since I am an accounting major, I have gained a major interest in government policies that may affect my future. I also have enjoyed learning about many accounting frauds that have taken place (especially since some companies went to great lengths to cover up what they were doing, check out ZZZZ Best for example). One of the major policies that has been passed and we have discussed in class is the Sarbanes Oxley Act of 2002. The article that we read for class analyzed the effects of the act shortly after it was implemented. As a result, I want to see if any results and analyses have changed.

 SOX was implemented after the Enron and WorldCom scandals. It was the government’s quick response and solution to the mistrust the public was gaining of big corporations.  SOX implemented many regulations on auditors and companies in order to make sure no more economic disasters would occur in the future (the financial crisis of 2008?). For my white paper, I want to explore the actual effects of SOX on society, companies, and auditing firms.

I used Google Scholar as my main search engine to help find sources/articles on SOX in general. There were many sources that were available. The third result caught my eye, “Economic consequences of the Sarbanes-Oxley Act of 2002”. This source had been cited 379! Within those sources that had cited this article, I found an article (“Why do firms go dark? Causes and economic consequences of voluntary SEC deregistrations”) that was devoted to focusing on one affect that SOX had; it caused many public companies to go “dark”. This article went into a lot of detail about how SOXs has led many firms to go dark and provided not only many additionally sources for me to research but also lots of useful calculations. It also had a larger number of hits (240).

When a firm goes dark, the firm deregisters with the SEC as a public company but they still trade in OTC markets. Therefore, they are not quite a private firm either. The overall study found that there were two main reasons for a company to go dark; as a way to save costs or to solve agency conflicts. SOX has been the main (but not only) cause for these two issues that have caused companies to go dark. SOX has caused many firms to spend more money on reporting and has also increased the “level of scrutiny that SEC registrants face”. Whenever, a firm deregisters but continues to trade, they make even less disclosures which can hurt the shareholders even more. Overall, the article had a negative view of SOX. It had a biased opinion without really offering another perspective.

I think this source can help with the development of my white paper. It focuses on one area that SOX has effected and it is a reliable source. Google Scholar appears to be a great search engine (once I figured out how to use it).

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About Amanda Skonezney

I am a senior accounting major and anthropology minor at Bucknell University. I am also apart of the division I women's water polo team. I currently live in Harrisburg, PA. After graduation, I plan on going into tax and earning my CPA.

Discussion

4 thoughts on “SOX causes Companies to go Dark

  1. I had no idea that companies could go dark – it seems almost like cheating. It’s disheartening to know that there will always be a way around legislation built to protect the rest of us from the consequences of someone’s actions. Has there been any legal action to try to prevent companies from going dark?

    Posted by Caitlin H. | March 27, 2012, 10:45 pm
  2. This is a topic that I think you are going to find TONS of information on (and is reflected in part by how many times the articles you looked at have already been cited) and it will require a bit of time on your end to sort out the inherently biased material from the material that seeks to present both sides of the story. It also looks like we have a few books in the collection that might be of particular interest to you. I did a quick search and came across “Auditing and accounting cases : investigating issues of fraud and professional ethics,” which looks to be very promising (SOX is included as one of the main subject terms for the book).

    Posted by Brody Selleck | March 28, 2012, 10:37 am
  3. Why would anyone think a company called ZZZZ best and pronounced “ze best” is legitimate? I didn’t know that fraud. Fascinating.

    Posted by Jordi | March 30, 2012, 5:19 pm

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