Financial Reporting after the Sarbanes-Oxley Act: Conservative or Less Earnings Management?

Jian Zhou, SUNY at Binghamton

ABSTRACT. We try to reconcile the conflicting findings concerning financial reporting after the Sarbanes-Oxley Act (hereafter SOX) in Cohen, Dey and Lys (2005) and Lobo and Zhou (2006). Cohen, Dey and Lys (2005) show that firms engage in less earnings management in the SOX period, while Lobo and Zhou (2006) find that firms report earnings more conservatively after SOX. We find that firms report earnings more conservatively and engage in less earnings management in the post-SOX period. This paper contributes to the literature by resolving the conflicting findings in the literature.

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