The chilling effect of Sarbanes-Oxley: A discussion of Sarbanes-Oxley and corporate risk-taking

Bargeron, Lehn, and Zutter [2009. Sarbanes-Oxley and corporate risk-taking. Journal of Accounting and Economics, forthcoming] document that as compared with non-US firms, risk-taking by publicly traded companies in the US declined after the passage of the Sarbanes-Oxley Act in 2002 (SOX). They conclude that this decline is related to board structure, firm size, and research and development expenditures. In my view, Bargeron, Lehn, and Zutter tackle an important question and provide carefully conducted analyses. However, as my discussion highlights, the question is difficult to answer, and as in similar studies on SOX, the evidence needs to be interpreted with caution.