The implementation of SOX Act affected all companies in the United StatesThe

The implementation of sox act affected all companies

This preview shows page 3 - 7 out of 11 pages.

The implementation of SOX Act affected all companies in the United States.The data given below shows the information about the ROE listings in the year 2001 and 2003: Statement of Hypothesis H 0 : The null hypothesis is that SOX did not lower the ROE following the enactment of the Sarbanes-Oxley Act. i.e. ROE ≥ 0 H 1 : The alternative hypothesis is that the SOX had a negative effect on the ROE following the enactment of the SOX because of which ROE < 0 . Bank ROE Criteria The ROE for the listed 20 banks is taken for the study reports list from SUO excel downloads were given and cited from the website: _ outside .asp. The year 2002 was not taken into consideration as the SOX Act was implemented in the year 2002. The average ROE value was calculated for the years 2001 and 2003. In 2001, the average ROE of the bank was 14.51% and in 2003, the average ROE of the bank was 17.19%. Going through these values, we see that the ROE was increased drastically after the implementation of SOX. ROE DATA RESULTS By focusing on the change in returns for each 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 the mean ROE after the act should be less than the mean before the act.
Image of page 3

Subscribe to view the full document.

HYPOTHESIS TESTING 4 Table 1 ROE DATA Bank of America -1.43 1.33 USAA 3.24 2.23 BB&T 2.49 1.86 Wells Fargo 35.76 38.16 Bank of York 4.5 2.2 TD Bank 7.42 9.16 Religions Bank 20.1 16.49 Sun Trust Bank 24.43 17.81 Carolina First Bank 27.46 23.44 Community First Bank 48.49 32.6 Palmetto Heritage Bank 46.68 40.1 Harbor National Bank 22.59 12.86 South Atlantic 5.18 1.5 First Federal 35.59 26.9 First Citizens 25.95 13.13 RBC Bank 33.26 29.2 Tidelands Bank 122.3 66.97 First Palmetto Savings 59.06 35.8 Sandhill’s 29.13 14.9 Capital Bank 60.44 41.8
Image of page 4
HYPOTHESIS TESTING 5 Comparing Means [ t-test assuming equal variances (homoscedastic) ] Descriptive Statistics VAR Sample size Mean Variance Before SOX 20 30.632 811.6826 After SOX 20 21.422 307.2925 .00921 dif Summary Degrees Of Freedom 38 Hypothesized Mean Difference 0% Test Statistics 1.2313 Pooled Variance 559.49 One-tailed distribution p-level 0.1129 t Critical Value (1%) 2.429 p-level 0.1129 t Critical Value (5%) 1.686 p-level 0.1129 t Critical Value (10%) 1.304 Table 2 Descriptive Statistics
Image of page 5

Subscribe to view the full document.

HYPOTHESIS TESTING 6 From the above chart, we see that 10 out of 20 companies ROE values in 2003 showed greater change when compared with those undertakings ROE values in 2001.
Image of page 6
Image of page 7
  • Winter '18

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes