The Sarbanes-Oxley Act and Corporate Investment: New Evidence from a Natural Experiment

2012 ◽  
Author(s):  
Julie Lei Zhu ◽  
Ana M. Albuquerque
Keyword(s):  
Natural Experiment ◽  
Corporate Investment ◽  
Sarbanes Oxley ◽  
New Evidence

Auditor Tenure and the Timeliness of Misstatement Discovery

2017 ◽  
Vol 93 (2) ◽  
pp. 315-338 ◽  
Author(s):  
Zvi Singer ◽  
Jing Zhang
Keyword(s):  
Natural Experiment ◽  
Audit Quality ◽  
Client Engagement ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Auditor Change ◽  
Negative Effect ◽  
Extended Analysis ◽  
Arthur Andersen

ABSTRACT Using the timeliness of misstatement discovery as a proxy for audit quality, we examine the association between audit firm tenure and audit quality in a setting that alleviates the endogeneity problem endemic to this line of research. We find that longer audit firm tenure leads to less timely discovery and correction of misstatements, which is consistent with a negative effect of long auditor tenure on audit quality. In addition, using the non-voluntary auditor change following the demise of Arthur Andersen in 2002 as a natural experiment, we show that the misstatements of its former clients were discovered faster than those of comparable companies that retained their auditors throughout the misstatement. This finding speaks to the benefit of a fresh look by a new auditor. An extended analysis shows that longer auditor tenure also leads to misstatements of greater magnitudes, and that the Sarbanes-Oxley Act has mitigated, but not eliminated, the negative effect of long auditor tenure. Last, we show that the negative association between auditor tenure and timely discovery of misstatements is mainly present in the first ten years of an audit engagement. Our study has implications for regulators who continue to express concern regarding lengthy auditor-client engagement. JEL Classifications: K22; K23; L51; M41; M42; M48.

scholarly journals Political elections and corporate investment: International evidence

2021 ◽  
Author(s):  
Mario Daniele Amore ◽  
Margherita Corina
Keyword(s):  
International Business ◽  
Political Institutions ◽  
Recent Literature ◽  
Electoral System ◽  
Corporate Investment ◽  
Listed Firms ◽  
International Evidence ◽  
Negative Effect ◽  
New Evidence

AbstractRecent literature shows that the spike in uncertainty during political elections harms firms’ investment. Bridging insights from international business and political science, we argue that the effect of political elections on firms’ investment activities is contingent on the country’s electoral system. In particular, we expect the negative effect of elections on corporate investment to be smaller for firms operating in plurality systems. We test our theory using a panel dataset of listed firms around the world, and a panel of US multinationals. Our results confirm that during an election period, firms in countries with a plurality system reduce investment less than firms in other countries. Additionally, we show that multinationals’ foreign investment is affected by elections abroad: their investment in a host country declines during an election in that country, though to a lesser extent if the election is held with a plurality system. Collectively, our findings provide new evidence on the role of political institutions for firms’ investment decisions.

SOX Section 404 and Corporate Innovation

2018 ◽  
Vol 54 (2) ◽  
pp. 759-787 ◽  
Author(s):  
Huasheng Gao ◽  
Jin Zhang
Keyword(s):  
Natural Experiment ◽  
Litigation Risk ◽  
Patent Citations ◽  
Section 404 ◽  
Corporate Innovation ◽  
Sarbanes Oxley ◽  
Real Costs ◽  
Corporate Innovativeness

This paper exploits a quasi-natural experiment to investigate the relation between the Sarbanes–Oxley Act (SOX) of 2002 and corporate innovation: firms with a public float under $75 million can delay compliance with Section 404 of the act. We find a significant decrease in the number of patents and patent citations for firms that are subject to Section 404 compliance relative to firms that are not. This relation is more pronounced when firms are financially constrained and when firms face high litigation risk. Overall, our evidence suggests that SOX imparts real costs to the economy by decreasing corporate innovativeness.

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