Effect of Sec Enforcement Actions on CEO and Cfo Forced Turnovers: Evidence Associated with Sox Provisions

29 Pages Posted: 18 Apr 2022

See all articles by Jui-Chin Chang

Jui-Chin Chang

Texas A&M International University

Alex P. Tang

Morgan State University

Date Written: December 14, 2020

Abstract

This study provides evidence that the effect of SOX provisions of SOX 302, SOX 303, and SOX 305 on the SEC-sanctioned CEO and CFO turnovers. Our findings show that the SEC uses enforcement actions and SOX provisions effectively to remove culpable CEOs and CFOs. The SEC-sanctioned CEOs are likely forced to resign when they violate SOX 305 and sanctioned-CFOs are likely forced to resign when they violate SOX 303 and their CPA licenses are suspended. When CFOs are masterminds, they are more likely forced to resign but they are less likely to be forced to resign when they team up with CEOs for fraudulent financial reporting. CFOs are also more likely to resign when firms face bankruptcy and restate earnings and when they face criminal charges in the post-SOX period.

Keywords: SOX provisions, CEO/CFO turnovers

JEL Classification: M41,M48, G34, G38

Suggested Citation

Chang, Jui-Chin and Tang, Alex P., Effect of Sec Enforcement Actions on CEO and Cfo Forced Turnovers: Evidence Associated with Sox Provisions (December 14, 2020). International Review of Economics & Finance, (76):277-287, Available at SSRN: https://ssrn.com/abstract=3873631 or http://dx.doi.org/10.2139/ssrn.3873631

Jui-Chin Chang (Contact Author)

Texas A&M International University ( email )

Texas
United States
956-326-2501 (Phone)

Alex P. Tang

Morgan State University ( email )

1700 E. Cold Spring Ln
Baltimore, MD 21251
United States

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