The 'Numbers Game' in the Pre- and Post-Sarbanes-Oxley Eras
New York University
Daniel A. Cohen
University of Texas at Dallas - Naveen Jindal School of Management
December 22, 2008
Journal of Accounting, Auditing and Finance, Forthcoming
We address two research questions in this study. First, is there a change in the prevalence of expectations management to meet or beat analysts' earnings expectations in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, did the mix among the three mechanisms used for meeting or beating analysts' earnings expectations: accrual-based earnings management, real earnings management, and expectations management change in the Post-SOX Period? We hypothesize and provide empirical evidence that the observed drop in the frequency of just meeting/beating analysts' earnings expectations is associated with both (1) a decline in the use of downward expectations management and upward accrual-based earnings management in the Post-SOX period relative to the preceding seven-year period and (2) an increase in upward real earnings management activities.
Keywords: Earnings management, Real Earnings Management, Expectations Management, The Sarbanes Oxley Act
JEL Classification: M4, M41, M48, G10, G38Accepted Paper Series
Date posted: January 18, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.313 seconds