- Elgar original reference
Edited by Benton E. Gup
Chapter 2: Forces of Change
2 Forces of change Benton E. Gup Some of the major factors that determine the success or failure of ﬁnancial institutions are beyond their control. These forces include, but are not limited to laws, globalization, technology, competitors, activist investors, demographics, and changing business models that are discussed below. Selected US federal legislation Federal and state laws and regulations limit the activities of ﬁnancial institutions. In this section, we examine three federal laws directly tied to ﬁnancial institutions, and some of their consequences to illustrate how laws can bring about changes in the ﬁnancial system. Federal laws do not have to be directed at ﬁnancial institutions in order to have an impact on them. As noted in Chapter 1, the Sarbanes-Oxley Act of 2002 (SOX) was enacted as a reaction to the scandals and bankruptcies of Enron, WorldCom, and other ﬁrms in order to deter ﬁnancial misconduct. The law has resulted in such high compliance costs for publicly-traded companies that some ﬁrms are going private, or changing their listing to foreign stock exchanges. Robert Grady, who runs the venture capital arm of the Carlyle Group, argues that Intel, Cisco, and E*Trade probably would not have public oﬀerings today because of SOX.1 Financial Executives International reported in 2005 that the average cost of complying with SOX Section 404 was $4.36 million.2 “Going private” means that a company reduces its shareholders to fewer than 300, and is no longer required to report to the Securities and Exchange Commission.3 Many de novo...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.