Purpose – The purpose of this paper is to investigate the impact of the Sarbanes-Oxley Act (SOX) on market-based measures of earnings quality and cost of capital. Design/methodology/approach – The paper uses empirical data to determine measures for the market's perception of earnings quality and the ex-ante cost of capital. The measures for 2001 (pre-SOX) are compared to the measures for 2003 (post-SOX). Findings – The results indicate that in the post-SOX period, the market's perception of earnings quality has improved, while the firms' cost of equity capital has decreased. Research limitations/implications – At a time when debate is raging as to the overall impact of SOX on the US economy, this study provides some evidence as to its beneficial nature. A limitation is that the method of computing restricts the sample, potentially creating biases. Originality/value – This is the first study to investigate the impact of SOX on the market's perception of earnings quality and the firms' cost of equity capital.