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White SOX / Black SOX?

White SOX / Black SOX?

by Rick Turoczy on May 8, 2006

Sarbanes-Oxley certainly has its costs. But it also has benefits. Corporate capitalism depends for its survival on a broadly held feeling that the system is fair, and that potential conflicts of interest between managers and shareholders can be contained. Perception matters, and the passage of Sarbanes-Oxley added to the perception that politicians were prepared to act if executive behavior becomes excessively unseemly.

SOX might also have contributed to a more sensible approach to mergers and acquisitions. The premiums that acquirers are willing to pay for the companies they woo, or stalk, are running at about half those characteristic of earlier periods of high M&A; activity. And a recent, although limited, study by the Cass Business School in London and consultants Towers Perrin found that transactions completed in the post-SOX era have outperformed the market by 7 percent. Similar deals in earlier merger booms significantly underperformed the market.

White SOX / Black SOX?

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