Financial Analysts' Forecasting Performance Post Sarbanes-Oxley

The Sarbanes-Oxley Act (SOX) addresses the quality of financial reporting, operations as well as corporate governance, and aims to improve the overall financial information environment by increasing the accuracy and reliability of corporate disclosure. This study investigates financial analysts' performance post SOX. We examine the impact of SOX on the accuracy of financial analysts' earnings forecasts by investigating pre- and post-SOX quarterly earnings estimates. Findings indicate that forecast accuracy has decreased for all firms in the sample. Also, financial analysts have become pessimistic in their earnings forecasts post SOX. The evidence points to a decrease in the quality of the financial information environment post SOX.