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

Zhexu Ai

Accounting and Finance2026https://doi.org/10.1111/acfi.70184article
AJG 2ABDC A
Weight
0.50

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.

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https://doi.org/https://doi.org/10.1111/acfi.70184

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@article{zhexu2026,
  title        = {{Do SEC Enforcement Actions Deter Real Earnings Manipulations of Industry Peers?}},
  author       = {Zhexu Ai},
  journal      = {Accounting and Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/acfi.70184},
}

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

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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