Self-published (Journal of Accounting, Auditing and Finance, forthcoming)
How has the Sarbanes-Oxley Act (SOX) affected chief financial officers at companies that are aggressive in their financial reporting? To answer that question, the authors evaluated 167 firms that restated earnings downward in the pre-SOX era and compared involuntary CFO turnover at those firms to the turnover at a set of 196 firms in the post-SOX era. The authors also tracked the career paths of the ousted CFOs for up to four years after their dismissal. The findings suggest that CFOs in both the pre- and the post-SOX era at firms that were forced to restate earnings were more likely to get fired because of their aggressive financial reporting than CFOs at firms that did not restate earnings. The results also show that CFOs terminated in the post-SOX era have a harder time finding a new job than they did before the legislation was enacted, suggesting that it has succeeded in holding CFOs more accountable for their actions.
The Sarbanes-Oxley Act has forced CFOs to be more answerable for their firms’ accounting, and to pay a steep professional price for reporting trouble.