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Read the pdf and write an assignment by following the instruction

12 font sized – single spaced – 2 pages ( does not count title page and ref page )

1

SARBANES-OXLEY – CONTEXT & THEORY:
MARKET FAILURE, INFORMATION ASYMMETRY &

THE CASE FOR REGULATION

Sean D. Jasso, Ph.D. ©
Journal of Academy of Business and Economics, Volume 9 (3) 2009 ISSN: 1542-8710

ABSTRACT

On July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley Act of 2002, also
known as the Public Company Accounting Reform and Investor Protection Act of 2002. At the heart of
the Act is the mandate for corporate reform from the massive financial and leadership fraud of the late
1990s and early 2000s. This paper is part of a series of essays that attempts to look deep into the soul of
the Act not only evaluating the efficacy of the policy, but also to verify the heralding for a new dedication
to the ethical and moral boardroom in the public corporation. The larger project consults legislative,
legal, historical, and philosophical primary and secondary research to confirm the big question, ‘Does
Good Behavior Pay Off?’ In this installment, I look to the Act itself recognizing that the literature on
Sarbanes-Oxley (SOX) to date has lacked the theoretical framework necessary for fully understanding its
public policy domain. The only consistent criticism on SOX from its inception has been from
management, economic, and political scholarship predominantly targeting its financial impact upon the
corporation through its rigid compliance mandates. The primary objective here is to understand
Sarbanes-Oxley as public policy in response to market failure – that is, when the market stops providing
efficient and ethical solutions to society.

Key words: Sarbanes-Oxley; Market Failure; Information Asymmetry; Public Policy Analysis;
Regulatory Environment; Benefits and Costs; Theory of Commerce; Ethics; Corporate
Governance.

1. INTRODUCTION

This paper addresses the questions how does the concept of market failure apply to ethical corporate
governance? Are corporate ethics authentic in the modern corporation or just lip service? Will Sarbanes-
Oxley achieve results? To attend to these questions the essay is organized in three sections. First, I
address the historical and philosophical context of the firm as depicted both by Aristotle and Adam Smith,
both leading thinkers on the concept of commerce and its impact on society. Second, I examine the issue
of market failure and information asymmetry, the theories guiding the reactive regulatory measures of
SOX attributed to corporate bad behavior. Third, I analyze the Sarbanes-Oxley Act from the perspective
of the policy analyst following the politics that designed the bill to the implementation agencies that
oversee its mandates.

The ultimate objective is to provide a better understanding of the regulatory connection between
government and the corporation. The guiding hypothesis is that Sarbanes-Oxley is effective legislation

Format:

· Two-page, single space, block format, justified margins, 12-point font

· Apa bibliographic citation of the work as your “title”

· Your Name, Course, Section number and date at the upper right

Content:

·
Thesis – identify the central lesson the author is trying to teach

·
Central Pillars – define and discuss at least three major learning outcomes

·
Discussion – reflection o nthe article impact on the future manager – in other

words, why does reading matter