Product Market Competition and Internal Governance: Evidence from the Sarbanes–Oxley Act

Management Science - Tập 63 Số 5 - Trang 1405-1424 - 2017
Vidhi Chhaochharia1, Yaniv Grinstein2, Gustavo Grullon3, Roni Michaely4
1University of Miami, Coral Gables, Florida, 33124
2Interdisciplinary Center Herzliya, 46150 Herzliya, Israel; and Cornell University, Ithaca, New York 14853
3Rice University, Houston, Texas 77252
4CJohnson Graduate School of Management, Cornell-Tech, Cornell University, New York, New York 10011

Tóm tắt

We use the Sarbanes–Oxley Act of 2002 (SOX) as a quasi-natural experiment to examine the link between product market competition and internal governance mechanisms. Consistent with the notion that competition plays an important role in aligning incentives within the firm, SOX has led to a larger improvement in the operation of firms in concentrated industries than in nonconcentrated industries. Furthermore, within concentrated industries, the effect is especially pronounced among firms with weaker governance mechanisms prior to SOX. We corroborate these findings using two additional regulatory changes in the United States and abroad. Overall, our results indicate that corporate governance is more important when firms face less product market competition. This paper was accepted by Itay Goldstein, finance.

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Thông tin xuất bản

Management Science

Tập 63 Số 5

1405-1424

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