Economic consequences of the Sarbanes-Oxley Act of 2002

Ivy Xiying Zhang

Research output: Contribution to journalArticlepeer-review

305 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)74-115
Number of pages42
JournalJournal of Accounting and Economics
Issue number1-2
StatePublished - Sep 2007


  • Corporate governance
  • Internal control
  • Non-audit services
  • Sarbanes-Oxley Act
  • Securities legislation


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