Degree Type
Honors Capstone Project
Date of Submission
Spring 5-1-2009
Capstone Advisor
Randal J. Elder
Honors Reader
Kofi Appiah Okyere
Capstone Major
Accounting
Capstone College
Management
Audio/Visual Component
no
Capstone Prize Winner
no
Won Capstone Funding
no
Honors Categories
Professional
Subject Categories
Accounting
Abstract
Widespread concern about earnings management, the management of financial information to mislead investors, was one of the key factors leading to the passage of the Sarbanes-Oxley Act of 2002 (SOX). In this study, I investigate whether SOX is effective in limiting earnings management. Earnings management is a concern because misrepresentation of a company’s financial position and the results of its performance can mislead investors into making poor investment decisions. This study examines earnings changes before and after the passage of SOX to see whether small positive earnings changes were less likely in the post-SOX period, supporting the effectiveness of SOX in constraining earnings management. This study did not find significant improvements in the quality of financial reporting after the passage of SOX. This lack of significant results could reflect the limits of the sample and the data analysis. It is also possible that earnings management was already being constrained prior to the Act, due to new auditing standards and media attention, or that earnings management was not as widespread as the media made it appear to be during the Enron and WorldCom scandals.
Recommended Citation
Lee, Liwin Troy, "The Effectiveness of the Sarbanes-Oxley Act in Constraining Earnings Management" (2009). Honors Capstone Projects - All. 484.
https://surface.syr.edu/honors_capstone/484
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
