SOX and Investor Confidence

In the January 29 issue of Business Week, David Henrymakes the case that Sarbanes-Oxley has improved investor confidence in public companies.   Most notably, Henry points out thatThomson Financial's Purity Index has documented a ten percent improvement in its Purity Index since SOX's 2002 debut.  Over the past five years, the Index tracked earnings and adjusted for "unusual charges and write-offs."  Previously, these "have been used to make earnings look better."  This improvement suggests that earnings reports have become more reliable, improving investor confidence.  Moreover, even "executives appear to have a firmer grasp of costs when they talk about operating margins."