The 'Numbers Game' in the Pre- and Post-Sarbanes-Oxley Eras

Posted: 18 Jan 2009

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Daniel A. Cohen

Texas A&M University College Station

Multiple version iconThere are 2 versions of this paper

Date Written: December 22, 2008


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, G38

Suggested Citation

Bartov, Eli and Cohen, Daniel A., The 'Numbers Game' in the Pre- and Post-Sarbanes-Oxley Eras (December 22, 2008). Journal of Accounting, Auditing and Finance, Forthcoming. Available at SSRN:

Eli Bartov

NYU Stern School of Business ( email )

44 W. 4th Street, Suite 10-96
New York, NY 10012
United States
212.998.0016 (Phone)

Daniel A. Cohen (Contact Author)

Texas A&M University College Station

Department of Accounting
College Station, TX 77843
United States

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