An empirical study of returns to scale of CPA firms in the post SOX era

Chang, Hsihui; Choy, Hiu Lam; Hwang, In-Kyeong

doi:10.1007/s10479-015-1826-4

Cited by 7 publications

(5 citation statements)

References 17 publications

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“…Productivity can also be influenced by producers' operating environments, including elements such as technological advancement, product market competition, capital market development, access to equity financing, deregulation, and flexibility of input markets (e.g., Syverson 2011, Chang et al. 2015, Karmarkar et al. 2015, Jacobs et al.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…In our main analyses and robustness checks, we use country-level TFP and labor productivity to capture productivity. Prior literature also uses accounting data to estimate firm-level productivity using data envelopment analysis (DEA) (Charnes et al 1978, Banker et al 2005, Banker and Natarajan 2008, Iyer et al 2013, Narayanan et al 2014, Chang et al 2015, Karmarkar et al 2015, Jacobs et al 2016, Chang et al 2018. Using the DEA approach, we estimate firm productivity for each year, country, and industry (based on the Fama-French 48 industry classification scheme), with a minimum of 10 observations for each group.…”

Section: Firm-level Measure Of Productivitymentioning

confidence: 99%

“…Factors that directly impact productivity at the plant or firm level include managerial practices or talent, quality of general labor workers, quality of capital inputs, investments in intangible assets such as information technology and R&D, innovation, corporate governance, and capital structure decisions (e.g., Bloom and Van Reenen 2007, Iyer et al 2013, Narayanan et al 2014. Productivity can also be influenced by producers' operating environments, including elements such as technological advancement, product market competition, capital market development, access to equity financing, deregulation, and flexibility of input markets (e.g., Syverson 2011, Chang et al 2015, Karmarkar et al 2015, Jacobs et al 2016, Chang et al 2018. However, there is scarce evidence on how financial reporting regimes and accounting standards may impact productivity.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…Productivity growth is an important indicator for overall economic growth and growth in real per capita incomes. 1 Prior studies attribute productivity to various internal and external factors including managerial talent, quality of labor and capital inputs, technology spillovers, and competition (e.g., Syverson 2011, Iyer et al 2013, Narayanan et al 2014, Chang et al 2015, Karmarkar et al 2015, Jacobs et al 2016, Chang et al 2018. However, little evidence exists on how changes in financial reporting regimes and accounting standards may affect productivity.…”

Section: Introductionmentioning

confidence: 99%

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Do Accounting Standards Matter for Productivity?

Banker

Huang

et al. 2021

Production and Operations Management

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In this study, we examine whether productivity shifts when accounting standards change. Using mandatory International Financial Reporting Standards (IFRS) as a shock to the accounting regime, we examine the changes in country‐level productivity. We find that mandatory IFRS‐adopting countries experience significant increases in total factor productivity (TFP) and labor productivity. The post‐adoption productivity improvements are greater for countries without IFRS convergence. Further, TFP increases more for countries that experience a larger increase in industry comparability. Taken together, the evidence suggests that the new IFRS accounting regime increases economic productivity via improving information environments and facilitating internal firm decisions.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Firm-level Measure Of Productivitymentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Do Accounting Standards Matter for Productivity?

Banker

Huang

et al. 2021

Production and Operations Management

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“…Alternatively, Linck et al (2009) look at the impact of the SOX on directors’ compensation and document significant increases in directors’ pay and total director costs, especially for small firms. Other studies have also examined the effect of the SOX on corporate risk behavior (Bargeron et al , 2010), structure of compensation (Chang et al , 2011), the role of audit committee (Zhang et al , 2007), the productivity and efficiency of public accounting firms (Chang et al , 2009a and 2009b) and CPA firms’ returns to scale (Chang et al , 2015). This paper extends the literature along the line of the actual operational effects of the SOX regulation by examining its effect on the productivity of firms.…”

Section: Introductionmentioning

confidence: 99%

The effect of the Sarbanes–Oxley Act on firm productivity

Chang

Choy

2016

JCC

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Purpose-This paper aims to examine the effect of the Sarbanes-Oxley Act (SOX), which was signed by President George W. Bush and came into effect on July 30, 2002, on firm productivity. Design/methodology/approach-The authors use the total factor productivity (TFP) as our measure of firm productivity. Findings-Analyzing annual firm-level data from the Compustat database for the period of 1991-2006, the authors find that firm productivity increases at a higher rate in the post-SOX period. The results indicate that, although firms incur significant costs in complying with the requirements of the SOX, they also benefit from these requirements as evidenced by the improved productivity over time post-SOX. There is also a shift in the output elasticities from capital toward labor. The SOX has a positive effect on the output elasticity of labor but a negative impact on that of capital. Research limitations/implications-The results have the following important implications. The SOX is a value-enhancing regulation in that it not only strengthens a firm's corporate governance but also improves its productivity. However, compliance with the SOX can impose a long-term cost on firms: the decrease in the capital investment, leading to a decline in the output elasticity of capital. If this decline in the capital investment continues, it can have an adverse effect on firm productivity in the long term. Originality/value-This paper extends the literature along the line of the actual operational effects of the SOX regulation by examining its effect on the productivity of firms.

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