SOX after Ten Years: A Multidisciplinary Review

86 Pages Posted: 17 Jan 2014 Last revised: 14 May 2015

John C. Coates, IV

Harvard Law School

Suraj Srinivasan

Harvard Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 12, 2014

Abstract

We review and assess research findings from 120 papers in accounting, finance, and law to evaluate the impact of the Sarbanes-Oxley Act. We describe significant developments in how the Act was implemented and find that despite severe criticism, the Act and institutions it created have survived almost intact since enactment. We report survey findings from informed parties that suggest that the Act has produced financial reporting benefits. While the direct costs of the Act were substantial and fell disproportionately on smaller companies, costs have fallen over time and in response to changes in its implementation. Research about indirect costs such as loss of risk taking in the U.S. is inconclusive. The evidence for and social welfare implications of claimed effects such as fewer IPOs or loss of foreign listings are unclear. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. On balance, research on the Act's net social welfare remains inconclusive. We end by outlining challenges facing research in this area, and propose an agenda for better modeling costs and benefits of financial regulation.

Keywords: SOX, Sarbanes-Oxley Act, Regulation, Fraud, Cost Benefit Analysis, Section 404, PCAOB, SEC

Suggested Citation

Coates, IV, John C. and Srinivasan, Suraj, SOX after Ten Years: A Multidisciplinary Review (January 12, 2014). Accounting Horizons, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2379731

John C. Coates

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Suraj Srinivasan (Contact Author)

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=10700

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