 The impact of the Sarbanes-Oxley Act on corporate innovationYuqi Gu and Ling Zhang Journal of Economics and Business, 2017, vol. 90, issue C, 17-30 Abstract: We study the effect of the passage of the Sarbanes-Oxley Act (SOX) on corporate innovation. SOX dramatically changed corporate governance landscape of public firms in the U.S, especially in increasing monitoring from outside independent directors, which may have an impact on corporate innovation. The passage of SOX introduced an exogenous shock to the corporate governance structure, which enables us to establish causality between SOX and corporate innovation. Using patent and citation data from the NBER patent citation database, board of directors data from Institutional Shareholder Services (ISS) and a difference-in-difference regression technique, we find that SOX increases corporate innovation, as measured by the number of patents and the number of citations per patent. Moreover, we find that the effects are stronger for firms facing more severe agency problems, i.e., firms with more entrenched CEOs as proxied by a longer tenure, and firms with low institutional ownerships. The effect is also found to be stronger for firms operating in innovative industries. Keywords: Sarbanes-Oxley Act; Corporate governance; Board of directors; Independent directors; Innovation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:90:y:2017:i:c:p:17-30 DOI: 10.1016/j.jeconbus.2016.12.002 Access Statistics for this article Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter More articles in Journal of Economics and Business from Elsevier |
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