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

45 Pages Posted: 4 Jan 2007 Last revised: 21 Aug 2008

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Daniel A. Cohen

Texas A&M University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: August 20, 2008


This paper asks two questions. First, has the prevalence of expectations management to meet/beat analyst expectations changed in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mix among the three mechanisms used for meeting earnings targets: accrual earnings management, real earnings management, and earnings expectations management shifted in 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.

Keywords: Earnings expectations, Analysts' forecasts, Expectations management, Earnings management, Real Earnings Management, Sarbanes Oxley

JEL Classification: G14, G29, G38, M41, M43

Suggested Citation

Bartov, Eli and Cohen, Daniel A., The 'Numbers Game' in The Pre-and Post-Sarbanes-Oxley Eras (August 20, 2008). NYU Law and Economics Research Paper No. 07-18, Available at SSRN: or

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 - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

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