The Sarbanes-Oxley Act and accounting quality: a comprehensive examination

This paper investigates the impact of the Sarbanes-Oxley (SOX) Act on the quality of financial statement information. Where other papers have only investigated the short-term effects of SOX, this paper takes a longer post-SOX period. A distinction is also made between technology and non-technology based firms. Earnings management, conservatism and value relevance measures were used in order to examine the impact of SOX on accounting quality. A significant increase was found on both the earnings management and value relevance measures, which was persistent over a four-year post-SOX period. On the contrary, a slight increase in conservatism was observed, however these results are not significant. Moreover, the technology based firms score worse on the
earnings management measure, thus, the separate investigation between technology and non-technology based firms has revealed interesting information which would otherwise have stayed undetected.