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Capital market regulation and human capital investment: evidence from SOX and accounting major choice
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DOI：10.1007/s11142-026-09978-9.png)
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Abstract
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This paper analyzes the impact of the Sarbanes–Oxley (SOX) Act on individuals’ decisions to invest their human capital in regulatory compliance. Exploiting geographic variation in SOX-induced growth in the demand for accounting labor and rich survey data on college students, we find that freshmen from regions with greater public company presence exhibit a more marked increase in the propensity to major in accounting after the enactment of SOX. Consistent with the financial incentives mechanism, we find that students respond more to SOX when they have stronger pecuniary preferences, when they are better positioned to seize the financial rewards of accounting, and when they have better access to information about SOX-induced changes in monetary returns to the accounting major. Finally, regions with greater public company presence exhibit larger increases in local wages and employment in the accounting industry.
Keywords:
Major choice
Labor supply
Accounting and auditing
SOX
Regulation
Compliance
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