The impact of SOX on opportunistic management behavior

An innovative aspect of this study is the use of a relatively new metric to capture opportunistic earnings management behavior. We define opportunistic earnings management as the difference between a firm's US-GAAP earnings and ex post earnings consensus derived from forecasts of financial analysts who follow that firm. Using over 24,500 quarterly reports of over 2,500 publicly-traded companies spanning two three-year periods, and controlling for factors previously linked to having an effect on earnings management and analysts forecast effort, we find statistical evidence supporting the proposition that, in the aggregate, the Sarbanes-Oxley Act (SOX) has served as a constraint on curbing opportunistic earnings management behavior, and thus should be considered as an effective means to improve the quality of financial reporting information.