The Unintended Effects of the Sarbanes Oxley Act of 2002

Research in Accounting Regulation, Vol. 22, No.1, pp. 18-28, 2009

29 Pages Posted: 24 Feb 2009 Last revised: 19 Oct 2010

See all articles by Nicholas V. Vakkur

Nicholas V. Vakkur

Trident University

R. Preston McAfee

California Institute of Technology - Division of the Humanities and Social Sciences; Yahoo! - Yahoo! Research Labs

Fred Kipperman

affiliation not provided to SSRN

Date Written: February 17, 2009

Abstract

The auditing profession came under intense scrutiny following the collapse of Enron and several other leading firms. Legislators responded swiftly with the Sarbanes Oxley Act of 2002, a stringent rules-based system widely considered the most comprehensive economic regulation since the New Deal. Researchers such as DeFond & Francis (2005) and Baker (2008) suggest the law may produce serious unintended harmful consequences, resulting in a call for further research to evaluate its impact upon firms. This paper contributes to this literature in several ways. First, it conducts a review and analysis of multiple literatures to formulate several exploratory hypotheses. Second, the strength of the conceptual model is evaluated using a random sample survey of Fortune 500 CEOs (n = 206). This represents the first scholarly attempt to evaluate managerial perception of this important law, which Buckley & Chapman (1997) suggest may be more relevant that its actual costs. Third, drawing from Carmona and Trombetta (2008), we suggest the law's overarching reliance upon strict, inflexible rules may have influenced CEO perception of Sarbanes Oxley. Since this is not a cost/benefit analysis, neither the potential benefits of the law nor its net effects were evaluated.

Keywords: The Sarbanes Oxley Act of 2002, Sarbanes Oxley, accounting, accounting regulation, regulation, financial market regulation, business law, corporate governance

JEL Classification: M4, M21, M12, K2, A10, D2, D6, E65, G18, G38

Suggested Citation

Vakkur, Nicholas V. and McAfee, Randolph Preston and McAfee, Randolph Preston and Kipperman, Fred, The Unintended Effects of the Sarbanes Oxley Act of 2002 (February 17, 2009). Research in Accounting Regulation, Vol. 22, No.1, pp. 18-28, 2009, Available at SSRN: https://ssrn.com/abstract=1345475 or http://dx.doi.org/10.2139/ssrn.1345475

Nicholas V. Vakkur (Contact Author)

Trident University ( email )

5665 Plaza Dr., 3rd Floor
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United States

Randolph Preston McAfee

Yahoo! - Yahoo! Research Labs ( email )

Sunnyvale, CA 94089
United States

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Fred Kipperman

affiliation not provided to SSRN ( email )

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