EARNINGS MANAGEMENT AND THE EPS INITIATIVE: BENEFITS OF ENGAGED SCHOLARSHIP

Abstract

ABSTRACT The Securities and Exchange Commission (SEC) has adopted research methodologies from academia to enhance its ability to identify registrants potentially engaging in earnings management. For example, the SEC uses techniques such as estimating discretionary accruals and others to flag suspicious activity for further investigation. Due to these efforts, the SEC has taken enforcement actions against four registrants under the EPS Initiative. These successful collaborations demonstrate the value of sharing knowledge and resources between academic researchers and regulatory bodies. Moreover, with the help of advanced data analytics technologies, there is an opportunity for the SEC and scholars to work together to promote greater transparency in registrants' financial reporting, illustrating the importance of engaged scholarship in academic research. Keywords Earnings management, EPS initiative, engaged scholarship