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Tale of Two Professions: The Impact of Sarbanes-Oxley Act and Global Economic Crisis on Public Accounting and Law Firms’ Revenue Generation

Sat, January 17, 7:30 to 8:30am, TBA

Abstract

In this paper we examine the impact of the Sarbanes-Oxley Act of 2002 (SOX) and the global economic crisis of 2008 on revenue generation patterns of public accounting and law firms. Using a sample of firm-year observations from both industries, we document that after the enactment of SOX, public accounting firms exhibit a significant increase in leveraging partner time while law firms significantly increase average charge-out rates. This “SOX-effect” persists for accounting firms after the crisis. By contrast, law firms exhibit a significant decrease in charge-out rates following the crisis. We also consider different strategic groups within each industry and find significant differences between strategic groups in the impact of SOX and the economic crisis.

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