How the Enron Scandal Changed American Business Forever

A significant number of Americans have foregone participating in the tremendous stock market gains seen over the last two decades.

Immediately following the bankruptcy, Congress worked on the Sarbanes-Oxley legislation, which was meant to hold senior executives responsible for listed company financial statements.

First, fewer companies are listed now than since the 1970s.

In 1996, during the dot-com bubble, there were 8,090 companies listed on stock exchanges in the U.S., according to data from the World Bank.

“Clearly, fewer companies can afford to meet all these requirements.”.

Companies now wait under they are far larger before going public than they did before the Sarbanes-Oxley rules were introduced.

Now, companies grow through investments that don’t require a public market listing and that don’t involve heavy bureaucratic costs.

But when companies stay private longer, they spend more time without the public accountability required of listed companies.

Former blood testing company Theranos famously remained private in a move some theorized was to avoid publicizing internal data.

Because of the high barriers Sarbanes-Oxley placed on going public, the business world is now littered with large, private companies that don’t have to reveal their inner workings.

Delaying going public also affects Main Street because most individual investors cannot buy shares in companies that aren’t public.

Put simply, the Sarbanes-Oxley regulations have chased away some investing opportunities from the public market to the private ones.