Economic consequences of the Sarbanes–Oxley Act of 2002

Economic consequences of the Sarbanes–Oxley Act of 2002 This paper investigates the economic consequences of the Sarbanes–Oxley Act (SOX) by examining market reactions to related legislative events. Using concurrent stock returns of non-U.S.-traded foreign firms to estimate normal U.S. returns, I find that U.S. firms experienced a statistically significant negative cumulative abnormal return around key SOX events. I then examine the cross-sectional variation of U.S. firms’ returns around these events. Regression results are consistent with the non-audit services and governance provisions imposing net costs. Additional tests show that deferring the compliance of Section 404, which mandates an internal control test, resulted in significant cost savings for non-accelerated filers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Economic consequences of the Sarbanes–Oxley Act of 2002

Loading next page...
 
/lp/elsevier/economic-consequences-of-the-sarbanes-oxley-act-of-2002-QWVuRZyvxr
Publisher
Elsevier
Copyright
Copyright © 2007 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2007.02.002
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the economic consequences of the Sarbanes–Oxley Act (SOX) by examining market reactions to related legislative events. Using concurrent stock returns of non-U.S.-traded foreign firms to estimate normal U.S. returns, I find that U.S. firms experienced a statistically significant negative cumulative abnormal return around key SOX events. I then examine the cross-sectional variation of U.S. firms’ returns around these events. Regression results are consistent with the non-audit services and governance provisions imposing net costs. Additional tests show that deferring the compliance of Section 404, which mandates an internal control test, resulted in significant cost savings for non-accelerated filers.

Journal

Journal of Accounting and EconomicsElsevier

Published: Sep 1, 2007

References

  • Economic consequences of SEC disclosure regulation: evidence from the OTC bulletin board
    Bushee, B.J.; Leuz, C.
  • Market efficiency in real time
    Busse, J.A.; Green, T.C.
  • Shredded reputation: the cost of audit failure
    Chaney, P.K.; Philipich, K.L.
  • Governance mechanisms and equity prices
    Cremers, K.J.M.; Nair, V.
  • Does the market value financial expertise on Audit Committees of Boards of Directors?
    DeFond, M.; Hann, R.N.; Hu, X.
  • Economic consequences of regulated changes in disclosure: the case of executive compensation
    Lo, K.
  • Auditor resignations: clientele effects and legal liability
    Shu, S.Z.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off