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 College Station

Multiple version iconThere are 2 versions of this paper

Date Written: August 20, 2008

Abstract

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: https://ssrn.com/abstract=954857 or http://dx.doi.org/10.2139/ssrn.954857

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

Register to save articles to
your library

Register

Paper statistics

Downloads
1,207
Abstract Views
4,662
rank
16,469
PlumX Metrics