The Effect of Financial Regulation on Nonfinancial Violations

• 成果类型: Article
• 署名作者: Giese, Vincent; Heese, Jonas
• 署名单位: University of Mannheim; Harvard University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826; 1558-7967
• DOI: 10.2308/TAR-2023-0676
• 发表日期: 2026-01
• 页码: 347-378
• 关键词: Corporate misconduct; SOX 404; Compliance; Financial regulation; sarbanes-oxley-act; INTERNAL CONTROL; Section 404; Accounting information; corporate-investment; FIRMS; SOX; earnings; weaknesses; QUALITY

摘要

This paper examines the effect of financial regulation on nonfinancial violations. Using differences in compliance requirements with Sarbanes-Oxley Act of 2002 (SOX) Section 404, we find that adoption of Section 404 increased firms' propensity for nonfinancial violations. This effect is stronger for firms with greater external scrutiny toward their financial reporting, greater challenges in monitoring their operations, and limited resources. These results, together with an examination of changes in audit fees, conference call transcripts, and 10-K disclosures, suggest that the effects primarily stem from a shift in attention and resources toward SOX 404. Further, the effects are concentrated in employee-related violations and persist for approximately two years. Overall, our results suggest that financial reporting regulation can result in unintended consequences harming stakeholders, such as employees.