The Sarbanes-Oxley Act was enacted in July 2002 in response to major accounting scandals. This thesis investigates the announcement effects surrounding the passage of SOX to examine the differential impact of SOX on U.S. publicly traded companies. As the Act requires greater transparency of financial reporting and imposes burden on managers through mandatory CEO/CFO certification of financial statements, the associated compliance costs create a significant loss in total market value that amounts to $1.4 trillion (Zhang 2005). It is predicted that SOX has a disproportionate negative impact on small firms due to the fixed cost component of the compliance costs and the characteristics of small firms (i.e. they compete on flexibility but SOX limits it). Previous studies show that the imposed compliance costs lead to a significant number of firms going dark or private in the post-SOX period, which suggests that the imposed compliance costs outweigh the induced benefits of SOX to shareholders (Engel 2004). While past studies have been done to examine the effect of SOX on public firms in general, this thesis is specifically interested in how different firm sizes react differentially to the events leading the passage of SOX. Through the event study methodology, the event day effect on stock returns and abnormal returns will be examined to see if the market also perceives the Act to have a negative impact on firms.