| United States public corporations in the late 1990s and the early part of the 21st century went bankrupt or faced extreme financial difficulties including Enron, WorldCom, Xerox, Global Crossing, and Halliburton Oil Services. These public companies caused the loss of billions of investor dollars, loss of jobs, and the loss of billions of dollars within pension accounts. The federal government's response to the manipulation of financial information became the Sarbanes-Oxley Act of 2002 (SOX). The enactment requires public companies to comply with stringent internal control standards and risk management assessment for the disclosure of corporate financial information. The proposed study explored the associative relationship between indirect costs of compliance and corporate valuation of large public companies before and after the enactment of SOX. The simple random sample of 100 large public companies was taken from the Standard and Poor's 500 market index. Two multiple linear regressions were conducted. The first linear regression that was conducted was Pre SOX, and the second linear regression that was conducted was Post SOX. The results of the linear regression were not significant, F(3,88) = 2.16, p = .098, R 2 = 0.07, suggesting that before SOX indirect compliance costs did not predict the average corporate value. The results of the second linear regression Post SOX were not significant, F(3,88) = 1.06, p = .373, R2 = 0.03, suggesting that average indirect compliance costs did not predict the average corporate value. Results of the signed rank tests indicated that there were significant differences between the distribution of stock prices on Jan 29 and Jan 30 (W =4.95, p < .001), stock prices on Jan 30 and Jan 31 (W = 4.88, p < .001), and Jan 39 and Jan 31 (W =-5.84, p < .001). The implications of the study were limited due to confounding variables such as industry changes, new product lines, market forces, mergers and acquisitions, and restatements of financial data. An understanding of a linear associative relationship between indirect compliance costs and corporate valuation under SOX was needed for public companies to create strategic risk management plans. |
