Sarbanes-Oxley and corporate risk-taking

Leonce L. Bargeron, Kenneth M. Lehn, Chad J. Zutter

Research output: Contribution to journalArticlepeer-review

320 Scopus citations


We empirically examine whether risk-taking by publicly traded US companies declined significantly after adoption of the Sarbanes-Oxley Act of 2002 (SOX). Several provisions of SOX are likely to discourage risk-taking, including an expanded role for independent directors, an increase in director and officer liability, and rules related to internal controls. We find several measures of risk-taking decline significantly for US versus non-US firms after SOX. The magnitudes of the declines are related to several firm characteristics, including pre-SOX board structure, firm size, and R&D expenditures. The evidence is consistent with the proposition that SOX discourages risk-taking by public US companies.

Original languageEnglish
Pages (from-to)34-52
Number of pages19
JournalJournal of Accounting and Economics
Issue number1-2
StatePublished - Feb 2010

Bibliographical note

Funding Information:
We thank Charles Calomiris, Allen Ferrell, Clive Lennox, Kate Litvak, Hal Scott, Peter Wallison, Jerold Zimmerman, Aiyesha Dey (the referee and discussant), the Editor, S.P. Kothari, and participants of the Journal of Accounting and Economics conference on Current Issues in Accounting and Reassessing the Regulation of Capital Markets for valuable comments. The authors gratefully acknowledge funding support from the National Research Institute of the American Enterprise Institute.


  • Corporate risk-taking
  • Investment policy
  • Legislative policy
  • Sarbanes-Oxley

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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