IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v37y2009i5p951-960.html
   My bibliography  Save this article

Using Malmquist Indexes to measure changes in the productivity and efficiency of US accounting firms before and after the Sarbanes-Oxley Act

Author

Listed:
  • Chang, Hsihui
  • Choy, Hiu Lam
  • Cooper, William W.
  • Ruefli, Timothy W.

Abstract

There have been many criticisms of the Sarbanes-Oxley (SOX) Act passed in July of 2002 to correct business accountability and performance practices. The act has a major emphasis on accounting and its practices. This paper attempts a response to these criticisms by investigating changes in productive efficiency for 62 of the largest US public accounting firms between the periods (2000-2001) and (2003-2004)--the periods before and after enactment of SOX in July of 2002. DEA is used to calculate Malmquist indexes of productivity and efficiency changes. This index is used because it can distinguish between changes in technical efficiency, which limit the possibilities, and changes in the performance efficiencies for each firm. Contrary to many of the criticisms, results indicate that accounting firms have exhibited significant post SOX growth in productive efficiency which is better than pre-SOX performances.

Suggested Citation

  • Chang, Hsihui & Choy, Hiu Lam & Cooper, William W. & Ruefli, Timothy W., 2009. "Using Malmquist Indexes to measure changes in the productivity and efficiency of US accounting firms before and after the Sarbanes-Oxley Act," Omega, Elsevier, vol. 37(5), pages 951-960, October.
    • Handle: RePEc:eee:jomega:v:37:y:2009:i:5:p:951-960
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305-0483(08)00114-X
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rajiv D. Banker & Hsihui Chang & Ram Natarajan, 2005. "Productivity Change, Technical Progress, and Relative Efficiency Change in the Public Accounting Industry," Management Science, INFORMS, vol. 51(2), pages 291-304, February.
    2. Scott Whisenant & Srinivasan Sankaraguruswamy & K. Raghunandan, 2003. "Evidence on the Joint Determination of Audit and Non‐Audit Fees," Journal of Accounting Research, Wiley Blackwell, vol. 41(4), pages 721-744, September.
    3. Craswell, Allen T. & Francis, Jere R. & Taylor, Stephen L., 1995. "Auditor brand name reputations and industry specializations," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 297-322, December.
    4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    5. Ijiri, Yuji, 2005. "US accounting standards and their environment: A dualistic study of their 75-years of transition," Journal of Accounting and Public Policy, Elsevier, vol. 24(4), pages 255-279.
    6. Nicholas Dopuch & Ronald R. King & Rachel Schwartz, 2003. "Independence in Appearance and in Fact: An Experimental Investigation," Contemporary Accounting Research, John Wiley & Sons, vol. 20(1), pages 79-114, March.
    7. Zhang, Yan & Zhou, Jian & Zhou, Nan, 2007. "Audit committee quality, auditor independence, and internal control weaknesses," Journal of Accounting and Public Policy, Elsevier, vol. 26(3), pages 300-327.
    8. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    9. Banker, Rajiv D. & Cooper, William W. & Seiford, Lawrence M. & Thrall, Robert M. & Zhu, Joe, 2004. "Returns to scale in different DEA models," European Journal of Operational Research, Elsevier, vol. 154(2), pages 345-362, April.
    10. Cullinan, Charles P. & Du, Hui & Wright, Gail B., 2006. "A test of the loan prohibition of the Sarbanes-Oxley Act: Are firms that grant loans to executives more likely to misstate their financial results?," Journal of Accounting and Public Policy, Elsevier, vol. 25(4), pages 485-497.
    11. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    12. Asare, Stephen & Cohen, Jeffrey & Trompeter, Greg, 2005. "The effect of non-audit services on client risk, acceptance and staffing decisions," Journal of Accounting and Public Policy, Elsevier, vol. 24(6), pages 489-520.
    13. Gordon, Lawrence A. & Loeb, Martin P. & Lucyshyn, William & Sohail, Tashfeen, 2006. "The impact of the Sarbanes-Oxley Act on the corporate disclosures of information security activities," Journal of Accounting and Public Policy, Elsevier, vol. 25(5), pages 503-530.
    14. Simunic, Da, 1984. "Auditing, Consulting, And Auditor Independence," Journal of Accounting Research, Wiley Blackwell, vol. 22(2), pages 679-702.
    15. William W. Cooper & Lawrence M. Seiford & Kaoru Tone, 2007. "Data Envelopment Analysis," Springer Books, Springer, edition 0, number 978-0-387-45283-8, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Hsihui & Choy, Hiu Lam & Cooper, William W. & Parker, Barnett R. & Ruefli, Timothy W., 2009. "Measuring productivity growth, technical progress, and efficiency changes of CPA firms prior to, and following the Sarbanes-Oxley Act," Socio-Economic Planning Sciences, Elsevier, vol. 43(4), pages 221-228, December.
    2. Peter Fernandes Wanke & Rebecca de Mattos, 2014. "Capacity Issues and Efficiency Drivers in Brazilian Bulk Terminals," Brazilian Business Review, Fucape Business School, vol. 11(5), pages 72-98, October.
    3. Iveta Palecková, 2017. "Application of Window Malmquist Index for Examination of Efficiency Change of Czech Commercial Banks," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 3, pages 173-190, September.
    4. Chahine, Salim & Filatotchev, Igor, 2011. "The effects of corporate governance and audit and non-audit fees on IPO Value," The British Accounting Review, Elsevier, vol. 43(3), pages 155-172.
    5. K. Tone & M. Tsutsui, 2015. "How to Deal with Non-Convex Frontiers in Data Envelopment Analysis," Journal of Optimization Theory and Applications, Springer, vol. 166(3), pages 1002-1028, September.
    6. Md Ali & K. Klein, 2014. "Water Use Efficiency and Productivity of the Irrigation Districts in Southern Alberta," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(10), pages 2751-2766, August.
    7. Fragoudaki, Alexandra & Giokas, Dimitrios, 2020. "Airport efficiency in the dawn of privatization: The case of Greece," Journal of Air Transport Management, Elsevier, vol. 86(C).
    8. Sarmento, Joaquim Miranda & Renneboog, Luc & Verga-Matos, Pedro, 2017. "Measuring highway efficiency : A DEA approach and the Malquist index," Other publications TiSEM 23264815-321e-45a3-83ee-9, Tilburg University, School of Economics and Management.
    9. Torben Schubert & Guoliang Yang, 2016. "Institutional change and the optimal size of universities," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1129-1153, September.
    10. Lorena Androutsou & Michail Kokkinos & Dimitra Latsou & Mary Geitona, 2022. "Assessing the Efficiency and Productivity of the Hospital Clinics on the Island of Rhodes during the COVID-19 Pandemic," IJERPH, MDPI, vol. 19(23), pages 1-12, November.
    11. Irena Lacka & Lukasz Brzezicki, 2021. "The Efficiency and Productivity Evaluation of National Innovation Systems in Europe," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 471-496.
    12. Marcel Clermont, 2016. "Effectiveness and efficiency of research in Germany over time: an analysis of German business schools between 2001 and 2009," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1347-1381, September.
    13. Fragoudaki, Alexandra & Giokas, Dimitriοs & Glyptou, Kyriaki, 2016. "Efficiency and productivity changes in Greek airports during the crisis years 2010–2014," Journal of Air Transport Management, Elsevier, vol. 57(C), pages 306-315.
    14. Yang, Guoliang & Ahlgren, Per & Yang, Liying & Rousseau, Ronald & Ding, Jielan, 2016. "Using multi-level frontiers in DEA models to grade countries/territories," Journal of Informetrics, Elsevier, vol. 10(1), pages 238-253.
    15. Amado, Carla A.F. & Santos, Sérgio P. & Sequeira, João F.C., 2013. "Using Data Envelopment Analysis to support the design of process improvement interventions in electricity distribution," European Journal of Operational Research, Elsevier, vol. 228(1), pages 226-235.
    16. Valentin Zelenyuk, 2019. "Data Envelopment Analysis and Business Analytics: The Big Data Challenges and Some Solutions," CEPA Working Papers Series WP072019, School of Economics, University of Queensland, Australia.
    17. Adel Hatami-Marbini & Aliasghar Arabmaldar & John Otu Asu, 2022. "Robust productivity growth and efficiency measurement with undesirable outputs: evidence from the oil industry," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(4), pages 1213-1254, December.
    18. Rafael Benítez & Vicente Coll-Serrano & Vicente J. Bolós, 2021. "deaR-Shiny: An Interactive Web App for Data Envelopment Analysis," Sustainability, MDPI, vol. 13(12), pages 1-19, June.
    19. Ching-Chin Chern & Tzi-Yuan Chou & Bo Hsiao, 2016. "Assessing the efficiency of supply chain scheduling algorithms using data envelopment analysis," Information Systems and e-Business Management, Springer, vol. 14(4), pages 823-856, November.
    20. Angeliki Flokou & Vassilis Aletras & Dimitris Niakas, 2017. "A window-DEA based efficiency evaluation of the public hospital sector in Greece during the 5-year economic crisis," PLOS ONE, Public Library of Science, vol. 12(5), pages 1-26, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:37:y:2009:i:5:p:951-960. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.