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Do SEC Enforcement Actions Deter Real Earnings Manipulations of Industry Peers?

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  • Zhexu Ai

Abstract

This paper examines whether SEC enforcement actions deter real earnings management (REM) by peer firms. Motivated by competing deterrence and substitution hypotheses, I find that peer firms significantly reduce REM in the quarter of a triggering event, consistent with deterrence. The effect is stronger for severe cases and robust across specifications. However, the deterrence effect weakens after the Sarbanes–Oxley Act, suggesting that REM became a more attractive alternative under stricter regulation. These findings underscore the complexity of regulating REM and support the SEC's recent focus on curbing such behaviour.

Suggested Citation

  • Zhexu Ai, 2026. "Do SEC Enforcement Actions Deter Real Earnings Manipulations of Industry Peers?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 66(2), pages 1691-1716, June.
    • Handle: RePEc:bla:acctfi:v:66:y:2026:i:2:p:1691-1716
    DOI: 10.1111/acfi.70184
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