The rash of companies going private, merging, and even going dark has prompted many to finger the high costs of being public related to Sarbanes-Oxley compliance. Now a few years on, there's finally some academic research looking into this. From The Conglomerate:
I had the pleasure of seeing Eric Talley present yesterday at UCLA's Corporate Governance Colloquium, which Steve Bainbridge is organizing. (The paper is not on SSRN but can be viewed on the UCLA colloquium page linked above.)
The paper (with Ehud Kumar and Pinar Kunaca-Mandic) compares rates of going private before and after Sarbanes-Oxley in the US and in Europe. As you might expect, small firms are more likely to go private after SOX in the US (but not in Europe), which is consistent with the story that SOX is burdensome on small public corporations.
I do have one nit, which is that some of the evidence might be explained by the 2003 reduction in the tax rate on dividends. Now that the tax rate is lower, on the margins it's easier (cheaper) for managers at small firms to extract profits from the corporate level. And managers have a stronger incentive to do so in a private company, where managers typically own more equity.
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