Licensed Professionals and Corporate Board Performance: The Effect of the Sarbanes-Oxley Act on the Audit Committee

Ben Posmanick (), Alex Obie () and Bobby Chung ()
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Ben Posmanick: St Bonaventure University
Alex Obie: St Bonaventure University
Bobby Chung: USF

No 2024-03, Working Papers from University of South Florida, Department of Economics

Abstract: We study the substitution between licensed and unlicensed workers and the quality effect of employing licensed professionals on firms. Leveraging a quasi-licensure mandate of the Sarbanes-Oxley Act (SOX) on audit committees of publicly-traded firms, this paper studies the employment spillover and quality effects of licensing at the firm level. Assembling multiple data sources, we identify independent directors with relevant licenses and the quality of accounting reports for more than 5,200 publicly-traded firms. Exploiting plausibly exogenous year-by-firm variation in fixed-effect models, the licensure mandate of SOX significantly increases the appointment of certified public accountants (CPAs) at the expense of other types of professionals at the board level. We find a precise zero effect for the presence of CPAs on audit committees on the need to refile financial statements.

Keywords: Occupational Licensing; Employment Spillover; Quality; Sarbanes-Oxley (search for similar items in EconPapers)
JEL-codes: G38 J44 K10 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-law and nep-lma
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