Good Sarbanes-Oxley Internal Controls = Higher Stock Prices

According to a report issued this week by Lord & Benoit, LLC (a national Sarbanes-Oxley research and compliance firm), the share price of companies that reported clean internal controls (i.e. no material weaknesses) beat the Russell 3000® Index by an average of about 10% over a two year period from March 31, 2004 through March 31, 2006. Shares of companies that reported internal control weaknesses in both 2004 and 2005 lost about 6% over the same period.

The report examined results for all December year-end Accelerated Filers that were registrants one year before Section 404 was required and have submitted at least two Section 404 internal controls assertions. That represents nearly 2,500 publicly traded companies and about half of the entire market capitalization of all publicly traded companies in the United States.