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

Author

Listed:
  • Ben Posmanick

    (St Bonaventure University)

  • Alex Obie

    (St Bonaventure University)

  • Bobby Chung

    (USF)

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.

Suggested Citation

  • Ben Posmanick & Alex Obie & Bobby Chung, 2024. "Licensed Professionals and Corporate Board Performance: The Effect of the Sarbanes-Oxley Act on the Audit Committee," Working Papers 2024-03, University of South Florida, Department of Economics.
    • Handle: RePEc:usf:wpaper:2024-03
    as

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    File URL: https://www.usf.edu/arts-sciences/departments/economics/documents/wpaper/2024-03.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Occupational Licensing; Employment Spillover; Quality; Sarbanes-Oxley;
    All these keywords.

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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