Impact of Sarbanes-Oxley Act (SOX)

Impact of Sarbanes-Oxley Act (SOX)
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Benefits of going public
A small business or company can raise capital through selling securities by first registering the company with the SEC. This makes the company public. The decision of a company to go public may have several advantages or benefits. One of them is boosting the company’s brand, prestige and publicity. An IPO distributes shares to a wide investor base creating greater public awareness for the company’s products and services. The increased visibility offers a publicly traded company competitive advantage over privately held companies in the same industry and makes it easier to expand nationally and internationally (KPMG LLC, 2008). Another reason is that the company acquires more capital to acquire other businesses with the increased public company’s stock. Going public increases the company’s liquidity. It makes it substantially less expensive to make acquisitions and get into mergers (KPMG LLC, 2008). The other benefit is whereby the company may have a better opportunity to access more capital. This is because it presents a better opportunity to benefit from investment banking and funds that do not cover private companies. This is influenced by the fact that public companies are more transparent as obliged by the public reporting requirements that increase investor confidence (KPMG LLC, 2008).
The company could attain the same benefits through alternative means. For instance, it may attain greater visibility through a marketing strategy. The appropriate marketing strategy would focus on advertising the brand to the right market segment. An effective marketing strategy would also give it a competitive advantage over the other companies in the same industry (Ennew & Waite, 2010). To increase access to capital, the company could make sure that its debt to equity ratio remains at attractive levels (Troy, 2008). Thi...