Economic Effects of SOX Section 404 Compliance: A Corporate Insider Perspective

56 Pages Posted: 2 Sep 2013 Last revised: 1 May 2014

See all articles by Cindy R. Alexander

Cindy R. Alexander

Securities and Exchange Commission (SEC)

Scott W. Bauguess

University of Texas at Austin - Department of Finance

Gennaro (帅纳) Bernile

University of Miami - Department of Finance

Yoon-Ho Alex Lee

Northwestern Pritzker School of Law

Jennifer Marietta-Westberg

U.S. Securities and Exchange Commission

Multiple version iconThere are 2 versions of this paper

Date Written: September 23, 2013

Abstract

We use survey responses from 2,901 corporate insiders to assess the costs and benefits of compliance with Section 404 of the Sarbanes-Oxley Act. The majority of respondents recognize compliance benefits, but they do not perceive these benefits to outweigh the costs, on average. This is particularly true among smaller companies where the start-up costs are proportionately larger. However, the perceived efficiency of compliance increases with auditor attestations, years of compliance experience, and after the remediation of a material weakness. Notably, the perceived effects of compliance depend largely on firm complexity, but are mostly unrelated to firm governance structure.

Keywords: Corporate governance, Internal controls, Regulation, Sarbanes-Oxley, Section 404

JEL Classification: G18, G38, K22, M49

Suggested Citation

Alexander, Cindy R. and Bauguess, Scott W. and Bernile, Gennaro (帅纳) and Lee, Yoon-Ho Alex and Marietta-Westberg, Jennifer, Economic Effects of SOX Section 404 Compliance: A Corporate Insider Perspective (September 23, 2013). Journal of Accounting & Economics (JAE), Forthcoming, USC CLASS Research Paper No. 13-3, Available at SSRN: https://ssrn.com/abstract=2319094

Cindy R. Alexander

Securities and Exchange Commission (SEC) ( email )

Washington
United States

Scott W. Bauguess

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Gennaro (帅纳) Bernile (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Yoon-Ho Alex Lee

Northwestern Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
(312) 503-2565 (Phone)

Jennifer Marietta-Westberg

U.S. Securities and Exchange Commission ( email )

100 F St NE
Washington, DC 20549
United States

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