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

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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.

Authors

• Keval U. Amin, Temple University

• Rajiv D. Banker, Temple University

• Jagan Krishnan, Temple University

• Eunyoung Whang, The University of Texas–Pan American