News & Events

Pincus: Stocks Fell On Bill Passage Fears

In his "Numbers Guy" column, Carl Bialik writes that companies have been complaining about the costs of complying with the Sarbanes-Oxley corporate-reform law since its passage in 2002. The outcry has intensified with the departure of Securities and Exchange Commission Chairman William Donaldson, as companies hope for new rules that might ease what they say is a financial burden. Putting a dollar figure on how much Sarbanes-Oxley has cost corporate America is extremely difficult, though that hasn't stopped many from trying. These studies use what's called event analysis -- attempting to isolate market movements around events believed to be driving investor gains or losses. In order to isolate the effect of Sarbanes-Oxley developments like votes in Congress and SEC rulemaking, researchers look at stock-market movements in the day before, of and after the events, and seek to exclude other potentially confounding factors, like major economic reports. In one unpublished work, University of Iowa accounting professor MORTON PINCUS argued that stocks fell because investors feared the bill wouldn't be passed, and not because of indications the bill would be passed and would be tougher than expected.

Return to top of page