Abstract

http://ssrn.com/abstract=1280712
 
 

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Mechanisms to Meet/Beat Analyst Earnings Expectations in the Pre- and Post-Sarbanes-Oxley Eras


Eli Bartov


New York University

Daniel A. Cohen


University of Texas at Dallas - Naveen Jindal School of Management

April 2007

NYU Working Paper No. 2451/27549

Abstract:     
This paper asks two questions. First, has the prevalence of expectations management tomeet/beat analyst expectations changed in the aftermath of the 2001-2002 accountingscandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mixamong the three mechanisms used for meeting earnings targets: accrual earningsmanagement, real earnings management, and earnings expectations management shiftedin the Post-SOX Period? We document that the propensity to meet/beat analyst expectations has declined significantly in the Post-SOX Period. Our primary findings explain this pattern. In particular, we find a decline in the use of expectations management and accrual management, and no change in real earnings management in the Post-SOX Period relative to the preceding seven-year period. Our results are robust to controlling for varying macro economic conditions. These findings contribute to the academic literature, investors, and regulators.

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Date posted: October 8, 2008  

Suggested Citation

Bartov, Eli and Cohen, Daniel A., Mechanisms to Meet/Beat Analyst Earnings Expectations in the Pre- and Post-Sarbanes-Oxley Eras (April 2007). NYU Working Paper No. DANIEL A. COHEN-05. Available at SSRN: http://ssrn.com/abstract=1280712

Contact Information

Eli Bartov (Contact Author)
New York University ( email )
40 W. 4th St., 423
New York, NY 10012
United States
212-995-4004 (Fax)
Daniel A. Cohen
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
972-883-4772 (Phone)
972-883-6811 (Fax)
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