Term Paper on "Sarbanes-Oxley Research Proposal Abstract"

Term Paper 3 pages (1494 words) Sources: 10 Style: APA

[EXCERPT] . . . .

Sarbanes-Oxley Research Proposal

Abstract

The intent of this research proposal is to evaluate, quantify and predict

the implications of the extent to which the 2002 Sarbanes Oxley Act has had

to date and will have in the future regarding the formation of smaller,

privately held businesses and the decision of larger, publicly-held

corporations to go private in order to avoid the costs and complications of

complying with the Sarbanes-Oxley Act. The migration of smaller companies

away from being public to opting to become private are also researched and

validated in the proposed research. The Sarbanes-Oxley Act has also been

attributed with the decision of smaller firms to seek acquirers to

alleviate the costs of being in compliance. The role of acquisitions as an

exit strategy fro smaller, undercapitalized firms who cannot afford to

invest in technologies and process-redefinition efforts to become compliant

with the Act is also evaluated in this proposal. The costs of internal

controls include adherence to Section 404 of the Act, CEO and CFO

certification of financial statements, and extended statute of limitations

for shareholder lawsuits are variables which will be considered as part of

the analysis. As the Act also addresses executive compensation in Section

402, Audit Committees, and the separation of Audit and non-Audit Services

are all considerations which will be taken into account within the proposed

research.

Problem Statement

The impact of the Sarbanes-Oxley Act on the decision of any size of company

to stay private, or if already publicly-traded, to seek out either an

acquirer or to take their companies private again, is the main research

problem of this proposed research study. For the smaller companies who may

not have the financial resources to fulfill compliance and re-engineering

tasks, the strategies they use to seek out acquirers and if publicly-

traded, to go private, are researched and quantified. For the larger

corporations who are public today, the decision to take themselves private

is financially quantified. The impact of the Act on the net increase in

privately held smaller businesses and the migration of larger corporations

from being public to being private.

Research Design

In creating a research design to quantify and develop a financial valuation

of the impact of the Act on small and large companies, first the definition

of just what a "small" company is relative to a larger corporation. In the

latter case, those members of the Fortune 1,000 can be considered members

of the larger corporation sampling frame for this analysis. The smaller

companies are defined by having a value of $15M in their current fiscal

years. These sampling frames will be specifically for those companies

headquartered in the United States. Market values both pre-SOX and post-SOX

will also be specifically measured to see if there is any statistical

significance in the difference between those companies who experience a

large drop in value in financial periods post the Act's enforcement.

Methodology

In evaluating the impact of the Act on the decisions of smaller companies

to stay private, and if already publicly-traded, take themselves private

again will be measured in this research design. The dynamics of this first

sampling frame will be measured using a stratified random sample of small

companies who fit one of four criteria: those smaller companies who have

been publicly-traded and chose to go private; those smaller companies who

have gone from being public to being sold (specifically the factors leading

to their acquisition will be explored and quantified); and finally those

smaller firms who have been private and have completed S1 filings with the

Securities and Exchange Commission prior to the enactment of the Act and

have since decided to stay private. The stratified random sample for the

larger corporations will include those corporations who were public and

went private; secondly, those who were public and went through the costs of

becoming compliant with the Acts;' requirements; and third, those larger

corporations that chose to be acquired versus spend to be compliant with

the Act. Taken together, all these factors will yield a table of values

driven both by small, public, small private, small acquired companies

versus larger corporations who went private, stayed public, and chose to be

acquired. From this table of values a statistical analysis of significance

will be possible to complete, in addition to the effects of the Act on

valuations of all three classes of firms. Correlation analyses to see the

level of variations explained by the three dominant strategies of going

private after being public, staying public and… READ MORE

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