Subject: File No. 4-497
From: Sonja Olhoft Rego

March 15, 2005

Subject: Re: File Number 4-497: Feedback on Implementation of Sarbanes-Oxley Act of 2002

Securities and Exchange Commission,

My colleagues Mort Pincus, Haidan Li, and I have written an academic study that examines the extent of substantive reforms in the Sarbanes-Oxley Act of 2002. Specifically, we conduct an event study to infer the capital marketís expectations for net benefit or cost of the Act. We find significantly positive stock returns for events that resolved uncertainty about the Actís final provisions or were informative about its enforcement. We also find that stock returns varied across firms based on the proportion on non-independent audit committee members, the extent of non-audit services performed by external auditors, and the probable amount of earnings management activity in prior years.

Overall, our empirical results are consistent with investors expecting the Act to have a net beneficial effect of improving the accuracy and reliability of financial reports by constraining earnings management and enhancing corporate governance. We believe our study may be useful to the Commission in helping it determine the marketís expectations regarding the costs and benefits of the Sarbanes-Oxley legislation, including the implementation of Section 404.


Sonja Olhoft Rego

Sonja Olhoft Rego
Assistant Professor
University of Iowa
Tippie College of Business

You can access my abstracts/papers on the
Social Science Network (SSRN) through the
following URL: