Graduation Year

2025

Date of Submission

4-2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Andrew Finley

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Clare M Grammig

Abstract

The Sarbanes-Oxley Act of 2002 (SOX) was passed in response to multiple widespread accounting scandals in the United States. Although SOX applied to all publicly traded firms, its impact was not felt proportionately across different industries. This thesis examines how finance and energy firms responded to legislative developments leading up to the passage of SOX. In order to do this, I used an event study framework and analyzed abnormal stock returns around five prominent SOX-related events to test my hypotheses: SOX had a negative impact on stock returns for firms in the finance and energy sectors, and the finance sector experienced a greater negative impact than the energy sector. Data on stock returns were collected from Wharton Research Data Services (WRDS), and expected returns were estimated using the Fama-French Three Factor Model. After conducting this analysis, my findings suggest that SOX-related events hurt firm valuations, but only at certain times. However, reactions did vary across sectors. Financial firms were hit harder than energy firms, which supports the idea that industries that are more closely tied to financial reporting and regulatory oversight were more vulnerable to regulatory shocks. This shows how different industries respond to regulatory reforms.

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