The average banks ROE was not lower following the enactment of the Sarbanes

# The average banks roe was not lower following the

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The average bank’s ROE was not lower following the enactment of the Sarbanes-Oxley Act in 2002.I think that it was higher because the Act forces the banks to tell the truth. In addition the banks that I have chosen are local small banks on average. I do not feel that these banks have any reason to lie. SOX further specifies that the administration record must include an analysis of the maintenance of controls for financial reporting. In effect, this requires a complete audit of inside controls, which greatly raises auditors' time and other expenses and costs in examining these controls. What’s the null hypothesis for this hypothesis test? By focusing on the change in returns for each individual bank, this should remove many of the unique factors impacting individual banks and help to isolate the treatment effect. If the costs and benefits of SOX are approximately equal then the mean for both should be the same. If the benefits of SOX exceed the costs, then the mean ROE of the banks should be greater after the introduction of the act. If the costs of SOX exceed the benefits then he mean ROE after the act should be less than the mean before the act. H 0 : The null hypothesis is that the ROE would be lower following the enactment of the Sarbanes-Oxley Act. What’s the alternative hypothesis for this hypothesis test? H 1 : The alternative hypothesis is that the ROE would be higher.

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Choose at least three different significant levels to conduct the hypothesis test. Is it possible that a Type I error occurred with the hypothesis test? Why or why not? t-Test: Two-Sample Assuming Equal Variances For alpha =0.01 Before SOX After SOX Mean 30.632 21.422 Variance 811.682627 4 307.292532 6 Observations 20 20 Pooled Variance 559.48758 Hypothesized Mean Difference 0 df 38 t Stat 1.23130149 P(T<=t) one-tail 0.11288820 8 t Critical one-tail 2.42856763 1 P(T<=t) two-tail 0.22577641 5 t Critical two-tail 2.71155760 2 Comparing the t-critical value in the output with the t-value. The t-value (1.231) is smaller than the t-critical value (2.712). Therefore we accept the null hypothesis. i.e there is significance difference between the ROE's before and after the introduction of SOX.
• Winter '18

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