An empirical examination of the impact of the Sarbanes Oxley Act in the reduction of pension expense manipulation

Paula Diane Parker, Nancy J. Swanson, Michael Timothy Dugan

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

Since the Sarbanes Oxley Act of 2002 (SOX) attempts to make managers more accountable for the fair presentation of reported earnings in their financial statements, we expect managers to manipulate pension expense less during the three years after the passage of SOX than during the three years preceding the passage of SOX. Our results reveal that for smoothing firms the magnitude of pension expense manipulation during the three years after the passage of SOX on average increases instead of decreases. On the other hand, for benchmark firms the magnitude of pension expense manipulation during the three years after the passage of SOX on average decreases as expected. This research provides mixed evidence concerning the effectiveness of SOX in making financial statement reporting more transparent and representative of actual financial position, in the area of pension expense.

Original languageEnglish (US)
Pages (from-to)233-241
Number of pages9
JournalAdvances in Accounting
Volume27
Issue number2
DOIs
StatePublished - Dec 1 2011
Externally publishedYes

Keywords

  • Benchmark behavior
  • Benchmark earnings
  • Managed earnings
  • Pension expense manipulation
  • Sarbanes oxley act of 2002
  • Smoothing behavior

ASJC Scopus subject areas

  • Accounting
  • Finance

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