@article{340ac5eba9e0406eb805cc7ba7a02fec,
title = "The impact of costly regulation on R&D investment levels and productivity",
abstract = "Prior research finds that risk-taking has declined after the Sarbanes-Oxley Act of 2002, consistent with the notion that SOX's corporate governance and internal control mandates diverted resources away from corporate risk-taking. We introduce to the accounting literature a new measure of R&D productivity, Research Quotient, to examine whether SOX affects R&D risk-taking and R&D productivity differently and whether the quality of the firm's governance and internal controls, pre-SOX, moderate these relations. While we find the relation between SOX and R&D risk-taking is sensitive to research design choices, we find a consistent positive relation between SOX and Research Quotient. Our evidence indicates that while firms may allocate fewer resources to R&D post-SOX, they concurrently manage their R&D investments more productively. Further, our results are robust to a difference-in-difference design and are stronger for firms with weaker governance pre-SOX.",
keywords = "Corporate governance, Innovation, Internal controls, Productivity, Risk-taking, SOX",
author = "Cianci, {Anna M.} and Convery, {Amanda M.} and Evans, {Mark E.} and Linda Hughen and Werner, {Edward M.}",
note = "Funding Information: We thank Derek Johnston (associate editor), Dennis Caplan (editor), our anonymous reviewer, Dirk Black (discussant), the participants at the 2020 Advances in Accounting Conference, and the seminar participants at Rowan University for providing constructive feedback. We thank Ann Marie Knott and Michael Cooper for providing helpful insights into the RQ measure. We have also benefitted through financial support from the School of Business at Wake Forest University, the Lerner College of Business and Economics at the University of Delaware, the Welch College of Business and Technology at Sacred Heart University, and the School of Business at Rutgers, the State University of New Jersey. Funding Information: We thank Derek Johnston (associate editor), Dennis Caplan (editor), our anonymous reviewer, Dirk Black (discussant), the participants at the 2020 Advances in Accounting Conference, and the seminar participants at Rowan University for providing constructive feedback. We thank Ann Marie Knott and Michael Cooper for providing helpful insights into the RQ measure. We have also benefitted through financial support from the School of Business at Wake Forest University, the Lerner College of Business and Economics at the University of Delaware, the Welch College of Business and Technology at Sacred Heart University, and the School of Business at Rutgers, the State University of New Jersey. Publisher Copyright: {\textcopyright} 2021 Elsevier Ltd",
year = "2021",
month = jun,
doi = "10.1016/j.adiac.2021.100527",
language = "English (US)",
volume = "53",
journal = "Advances in Accounting",
issn = "0882-6110",
publisher = "JAI Press",
}