Contagion effect of the Sarbanes–Oxley Act: Evidence from Spain

EXECUTIVE SUMMARY

This study provides an overview of Spanish regulators’ efforts to strengthen disclosure and governance regulations in capital markets. Disclosure and corporate governance became an increasingly important issue, particularly after the recent wave of corporate scandals and the enactment of the Sarbanes–Oxley Act in 2002. In the post-Sarbanes–Oxley Act era, regulators around the world took different paths to combat scandals and heal the damage corporate scandals incurred on investors’ confidence. This study analyses the path that Spanish regulators took to deal with disclosure and corporate governance concerns and compares and contrasts the Spanish efforts to the Sarbanes–Oxley Act in terms of content and enforcement. As a result of our analysis, we find the Sarbanes–Oxley Act's impact on Spanish regulations to be significant. Substantial effort on behalf of Spanish regulators was put to increase disclosure and governance standards in Spain. Nevertheless, Spanish regulators’ efforts often lacked the enforcement that was established in the US. Spain's growing importance in world markets and its unique approach to dealing with corporate governance issues makes the analysis of Spanish efforts to enhance corporate governance standards highly relevant to a wide audience, which includes but is not confined to (1) executives and managers of global companies that do or seek business in Spain, (2) researchers working in the field of disclosure and corporate governance, (3) regulators concerned with meeting investors’ growing demands for higher disclosure and corporate governance standards, (4) attorneys focused on Spanish corporate governance law, (5) international investors assessing investment opportunities in Spain, and (6) stock exchange officials considering cooperation with Spanish stock exchanges. Last but not least, this paper complements a series of previous papers published in this journal that focus on corporate governance in various countries. With this paper we hope to add on to the efforts of International Journal of Disclosure and Governance to give a full view of new regulations on disclosure and corporate governance around the world.