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We investigate how firms’ responses to misconduct change when the institutional environment becomes more stringent. Organizational theory offers conflicting perspectives on whether new legislation will increase or decrease pressure on firms to take remedial action following misconduct. The dominant perspective posits that new legislation increases expectations of firm behavior, amplifying pressure on them to take remedial action after misconduct. A more recent perspective, however, suggests that the mere necessity to meet more stringent regulatory requirements certifies firms as legitimate to relevant audiences. This certification effect buffers firms, reducing the pressure for them to take remedial action after misconduct. Using a temporary, largely arbitrary exemption from a key provision of the Sarbanes-Oxley Act, we show that firms that were not required to meet all the regulatory standards of good governance it required became 45% more likely to replace their CEOs following the announcement of an earnings restatement after Sarbanes-Oxley. On the other hand, those that were required to meet all of Sarbanes-Oxley’s provisions became 26% less likely to replace their CEOs following a restatement announcement. Ironically, CEOs at firms with a legislative mandate intended to increase accountability for corporate misconduct shoulder less blame than do CEOs at firms without such legislative demands.

This study seeks to evaluate, in a global context, the impact of Sarbanes Oxley Act on a particular risk measure of importance to investors (risk‐adjusted returns), and two measures of risk due to asymmetry (upside and downside risk). A unique dataset permits a dual evaluation of the law's impact on such measures in leading non‐US economies as well (i.e. “ripple effects”).

Hypotheses are empirically evaluated on a sample (n=712) of the largest US and European firms (control) using daily return data from 1993 through 2009 – one of the most extensive data sets employed in the literature on this topic to date. The reliability of the risk measures is carefully evaluated using multiple approaches, including Fama‐MacBeth regressions. A series of difference‐in‐difference analyses is then employed to empirically assess Sarbanes Oxley's impact on equity risk.

The findings suggest Sarbanes Oxley decreased both risk‐adjusted returns and upside risk, whereas downside risk fails to explain the cross section of returns for the largest US firms. From a global perspective, it is suggested that the enactment of Sarbanes Oxley's in the USA motivated leading non‐US economies to adopt similar regulatory measures, which caused “ripple effects” – e.g. effects similar to those documented in this paper – in leading non‐US economies.

The findings suggest that comprehensive financial regulations, such as Sarbanes Oxley Act, are properly envisaged at the global level, as their impact is not confined to the home country. In an increasingly globalized economy, investor welfare is likely to be influenced – directly as well as indirectly – by economic and financial regulation(s) enacted in foreign economies. Arguably, this suggests the pivotal importance of effective mechanisms of global governance, such that a purely domestic approach to regulation may be short‐sighted. In either case, the findings of this study are entirely relevant if regulators are to consider the broader, global impact of regulation on investor welfare.

This is the first study to empirically analyze, within a global framework, Sarbanes Oxley's risk implications without relying on a series of simple mean variance analyses. Substantive research documents that the methodological approach employed is more precise, reliable as well as “investor relevant”. Furthermore, the authors seek to assess the law's impact on leading non‐US equity markets, a first for the literature. Consequently, this study provides a robust evaluation of the law's (international) impact on firm (equity) risk, making an important contribution to the literature.

In response to corporate scandals the USA issued the Sarbanes‐Oxley Act to promote corporate responsibility for financial reporting. Some see the impact of the US legislation crossing borders and influencing the nature of financial reporting in other countries. The purpose of this paper is to investigate whether or not there have been increases in transparency in non‐US financial markets, specifically in South East Asia, suggesting a ripple effect as a result of the Sarbanes‐Oxley Act.

The study examines the audited financial statements of 92 South East Asian companies issued before and after the Sarbanes‐Oxley legislation to note any significant increase in transparency. As a proxy for transparency, the study examines the number of footnotes included in audited financial statements.

The results indicate a statistically significant increase in the number of footnotes in the positive direction. Because of this increase, a changing trend of increased transparency is suggested in South East Asia.

In 2002 the USA passed the Sarbanes‐Oxley Act to promote corporate responsibility for financial reporting. Some see this US legislation creating a ripple effect on financial reporting in other countries. The findings of this study suggest a changing trend of increased transparency in financial reporting in South East Asia. Although this trend cannot be directly attributed to the effects of the Sarbanes‐Oxley Act, it appears to be related to a larger, more transcendent worldwide reform movement towards increased corporate responsibility and financial reporting to which the Sarbanes‐Oxley Act appears to have served as a catalyst.

This paper seeks to describe how Sarbanes‐Oxley controls can be integrated into an investment company's overall corporate governance framework.

Outlines the elements of an effective corporate governance framework, describes the benefits of integrating Sarbanes‐Oxley controls and adopting an effective corporate governance framework, and recommends how to go about that integration process

Sarbanes‐Oxley controls put in place by many firms are disconnected from other governance controls designed for compliance with federal, state, and self‐regulatory‐organization regulations. Many firms are taking a holistic view of mitigating financial reporting risk by integrating Sarbanes‐Oxley controls into their distributed governance frameworks.

Provides useful advice on how to integrate Sarbanes‐Oxley controls into an overall corporate governance framework.

The purpose of this study is to empirically analyze, with a greater degree of accuracy than is currently presented in the literature, the comprehensive risk impact of the Sarbanes Oxley Act of 2002. Research to date is based upon a series of simple mean‐variance analyses and is therefore unreliable.

Rigorous statistical methodology to include a highly representative dataset, difference‐in‐difference analysis, comprehensive controls, and fixed effects (firm as well as longitudinal). As a reliability check, the authors also employ several pre‐ and post‐tests.

In support of Bargeron et al., the authors find that the Sarbanes Oxley Act of 2002 significantly reduced firm risk. In particular, the law reduced firms' risk‐adjusted returns as well as “upside” risk. This is not a mere repeat of prior research, but a detailed analysis of the law's risk impact.

As a study of corporate risk, there are inherent limitations, as contained in every study of this type. First, the authors are unable to account for every single factor that might influence firm risk. However, their methodology represents a significant improvement over the current literature, and therefore produces more comprehensive, detailed, and reliable findings.

The main practical implication is that Sarbanes Oxley, the most important and comprehensive US financial regulation since the New Deal, reduced firm (equity) risk. This represents a finding of enormous importance: comprehensive accounting regulation was never intended to alter firm risk, yet this study strongly suggests that it has in two specific ways.

As a result of this study, the cost to investors – the “social” cost – of this important regulation can now be analyzed more conclusively. In particular, the authors suggest Sarbanes Oxley reduced “upside” risk as well as firms' risk‐adjusted returns. This is of enormous potential importance to investors of all types.

This study is original and hence important in several ways: the dataset is arguably an improvement – in terms of the degree to which it is representative of the US economy – over Bargeron et al., the most conclusive study of its type to date; the methods are a significant improvement over the current published studies in the literature; the risk measures analyzed are also entirely distinct and new from prior research in a manner that is important. Prior research, as based upon simple mean‐variance analyses, is unreliable.

The purpose of this article is to examine the potential of The Sarbanes‐Oxley Act on financial accounting systems in publicly‐held companies.

This article examines the Public Company Accounting Reform and Investor Protection Act 2002, commonly referred to as The Sarbanes‐Oxley Act, enacted by the US Congress in the wake of a series of business scandals in the USA. The focus is on the records management implications of the act.

The Sarbanes‐Oxley clearly has the potential to elevate the records management function to a new and higher level than it has ever enjoyed in the life of US business corporations. Future developments must be watched to see whether this proves to be the case.

This article will be helpful to those with more than just a passing interest in the significant happenings affecting records management in the USA.

As a result of scandals concerning major financial crime in the early twenty‐first century, including accounting and auditing fraud and inappropriate behavior by directors on the boards of US corporations, Congress hurriedly enacted the Sarbanes‐Oxley Act (SOX) in 2002. SOX's major purpose was to restore investor confidence in America's securities markets. Small firms argued that their cost of compliance was very heavy and that their burden was greater than for larger firms, especially the costs related to section 404 of the Act, which dealt with new requirements to obtain independent audit opinions. The authors found no empirical research that supports or denies these claims. Subsequently, in 2007, the Securities and Exchange Commission reduced the Act's new audit requirements for small companies. This paper aims to examine audit fees for large and small firms.

The study examines actual audit fee data to investigate the increased costs paid by publicly traded companies to independent audit firms for their services due to Sarbanes‐Oxley. The authors use univariate and multivariate statistical methods to compare increases in audit fees paid by samples of 150 large firms and 150 small firms.

The study finds that both small and large firms incurred increased audit fees due to compliance with Sarbanes‐Oxley, and that small companies did incur larger increases in their cost burden.

The study uses actual audit fee data reported to the Securities and Exchange Commission and controls for other factors that determine audit fees in reaching its conclusions.

Adopting the Sarbanes‐Oxley Act has provided impetus to reforming corporate accounting and corporate governance. Implementation of this legislation is so broad as to move from mere statutory compliance, to provide authority for changes in the professions of accountants and corporate officers and corporate counsel. This paper describes effects of the Sarbanes‐Oxley Act (Public Law No. 107‐204, Sec. 1‐1107) on the principal management and control functions of the business environment.

The purpose of this paper is to evaluate recent corporate failures and their effect on financial statements, as well as the measures being taken to rebuild trust in corporate America.

Looks at how corporate governance in the USA is undergoing comprehensive reforms, particularly the significant Sarbanes‐Oxley Act.

Measures to rebuild trust in corporate America are being implemented.

The paper is of value by showing how the Sarbanes‐Oxley Act is by far is the most important legislative act governing business in the beginning of the twenty‐first century.