MIT Sloan Assistant Professor Ryan LaFond says that Sarbanes-Oxley does add costs for businesses, but predicts that burden will most likely ease over time. "Most audit firms will tell you that there was a large, one-time cost to get companies up to speed to meet SOX requirements, but going forward, things won't be so costly."
Despite current calls in Congress to ease the impact of the Sarbanes-Oxley Act, an MIT Sloan School of Management professor and coauthors find that the Act's reporting and disclosure standards have brought significant financial benefits for businesses, including smaller firms that some have been seeking to exempt from the law.
Far from just adding to corporate costs, says MIT Sloan Assistant Professor Ryan LaFond, "our findings tell a very different but consistent story about Sarbanes-Oxley. Firms with strong internal controls already in place and firms that remediate prior control weaknesses are rewarded with a significantly lower cost of capital," which falls by as much as 150 basis points for firms that can demonstrate such compliance.
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