SOX Section 404 and corporate innovation

Huasheng Gao, Jin Zhang

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)


This paper exploits a quasi-natural experiment to investigate the relation between Sarbanes- Oxley Act (SOX) and corporate innovation: firms with a public float under $75 million can delay compliance with Section 404 of the Act. We find a significant decrease in the number of patents and patent citations for firms that are subject to Section 404 compliance relative to firms that are not. This relation is more pronounced when firms are financially constrained and when firms face high litigation risk. Overall, our evidence suggests that SOX imposes real costs to the economy by decreasing corporate innovativeness.

Original languageEnglish
Number of pages29
JournalJournal of Financial and Quantitative Analysis
Issue number2
Publication statusPublished - Apr 2019


  • Innovation; Patents; SOX; Section 404

Cite this