Economic Costs of SOX

Our Simon School of Business Dean Mark Zupan has written a white paper about the economic costs of the Sarbanes-Oxley act along with Simon School Ph.D. student Ivy Xiying Zhang.

According to Zupan and Zhang, "The accounting and compliance costs associated with the Sarbanes-Oxley Act (SOX) are well understood and fairly easy to estimate."

"These costs, however, pale in comparison to the overall economic costs of SOX, which we estimate to be as high as $1.4 trillion on the basis of the stock market reaction to SOX-related news announcements."

Among these harder-to-measure, but much more substantial costs, are the fact that SOX diverts the attention of senior management from doing business.

SOX was intended to enhance corporate governance and thereby restore public confidence in the wake of some high-profile corporate scandals. But specific provisions of SOX, while well-intentioned, serve to put additional sand in the gears of our country’s economic engine. So is SOX worth it?

We have many researchers at the Simon School who are researching current business issues that many of you are thinking about. For more information on our research visit us at our web site. We welcome your input. Comment here or contact us by email.