Did the Sarbanes-Oxley Act Improve Corporate Governance?

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Focusing on the impact of the Sarbanes-Oxley Act (SOX), this research investigates its benefits, particularly in governance and agency conflict resolution. Analyzing domestic manufacturing firms on the New York Stock Exchange, it finds that pre-SOX governance mechanisms failed to mitigate agency conflicts effectively. Post-SOX, these controls became more effective, demonstrating a significant reduction in agency costs. The study provides the first evidence that SOX not only incurs costs but also delivers measurable benefits, particularly in enhancing governance effectiveness.