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Assessing the Impact of Sarbanes-Oxley Act on the Logistics Industry: An Exploratory Study

Regulatory compliance imposes economic costs on organizations and can affect their competitive advantage. Using Sarbanes-Oxley (SOX) Act as the context, we examine its economic consequences on the operating performance of the logistics industry, including 3PLs. Passed in July 2002, SOX mandates widespread and radical corporate governance reforms with the goal of reinstating investors’ confidence in the financial reporting process in particular, and the financial system in general. Little evidence is available regarding the economic consequences of such reforms on the logistics industry, especially within private and small organizations (such as logistics service providers) that, unlike public organizations, do not have direct SOX compliance and reporting obligations. Our findings suggest that logistics firms in our sample invest in key resources (e.g., managerial expertise and technology) to comply with SOX, experience organizational changes (with associated negative effects) following SOX, manage their existing workforce to comply with SOX, and do not perceive significant advantages from being SOX compliant. Our findings have significant managerial implications for both logistics firms and their supply chain trading partners.