Academics weigh in on Sarbox and IPOs

The media was chock full of stories recently about the dearth of venture-capital-backed initial public offers. The easy culprit is Sarbanes-Oxley. But as a counter to that view, consider some research by a trio of academics who looked at offerings from 1993 to 2007. They found a "statistically significant increase in non-underwriting expenses" of 0.8 percentage points, which certainly reflects higher accounting and legal fees. But Sarbox also tended to reduce underpricing of initial offers, perhaps because emboldened investors were willing to pay more. When you balance it all out, the researchers found that total costs of IPOs fell by about 3 percentage points after Sarbox. As Portfolio points out, the anti-Sarbox VC crowd has pointed out that the benefits of better offer prices seems to be more of a big company phenomena. Recall smaller companies have been given another 404(b) delay.  

For more:
- here's the study
- here's some discussion from Portfolio magazine

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