How entrenched managers beat earnings expectations before and after SOX

摘要

This study investigates the relationship between managerial entrenchment and how firms meet or beat earnings forecasts. It further examines whether this relationship changes before and after the Sarbanes-Oxley Act (SOX). We find that, in the pre-SOX era, entrenched managers meet or exceed analyst forecasts more often than their unentrenched counterparts when analysts' initial forecasts are high. This is mainly due to the drop in analysts' consensus rather than earnings management. These results nearly disappear in the post-SOX era.