January 23, 2005
Prof. Ribstein on Sarbox and Delistings
Posted by Christine Hurt

Prof. Ribstein on Sarbox and Delistings

Larry Ribstein at Ideoblog has also been posting on the delisting article in the NYT yesterday: here and here. Larry doesn't think that I've made a sufficient argument that the benefits of Sarbox outweigh the costs, and I don't either. In my earlier post, I indicated (with a double or triple negative, so maybe it's muddled) that no one seems to be able to make out an argument that the benefits of this legislation outweigh the costs.

That being said, I was not moved to action by the article about smaller firms and firms emerging from bankruptcy having to delist without more information about the estimated 200 firms that delisted. As Larry points out, it's one thing for firms to delist that should not have been public in the first place, but quite another for a piece of regulation to keep the good but small firms out at the same time. I could not tell from the article which scenario was happening.

While we are talking about costs and benefits, I do wish someone could make an argument about the benefits of Sarbox. As Larry has written on his blog earlier, much of the regulation of the capital market focuses, misguidedly, on the retail investor. Does Sarbox make the market safe for the retail investor? Does it increase the information that retail investors need or want? Do retail investors actually use this information? As a colleague said to me the other day, "Be wary of legislation that is passed almost unanimously or that is named after a little girl."

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