This study examines real and accrual-based earnings management before and after the passage of the Sarbanes-Oxley Act (SOX) in 2002. It finds that accrual-based earnings management increased steadily until SOX was enacted, after which it declined significantly. Conversely, real earnings management activities decreased prior to SOX but increased significantly after its passage, suggesting that firms shifted from accrual-based to real earnings management methods post-SOX. The study also finds that accrual-based earnings management was particularly high in the period immediately preceding SOX. Firms that just met or exceeded earnings benchmarks used less accruals and more real earnings management after SOX compared to similar firms before SOX. The study also finds that the increase in accrual-based earnings management before SOX coincided with an increase in equity-based compensation, particularly option-based compensation. The results suggest that firms switched to real earnings management methods after SOX, which are harder to detect but more costly. The study also finds that the level of real earnings management increased after SOX, indicating a substitution effect between real and accrual-based earnings management. The study uses a variety of measures to assess earnings management, including discretionary accruals and real earnings management proxies. The results show that the overall level of accrual-based earnings management decreased from the SCA period to the post-SOX period, while the level of real earnings management increased in the post-SOX period. However, there was significantly higher earnings management, particularly income-increasing earnings management, during the SCA period compared to the pre-SCA period. The study concludes that the passage of SOX likely led to a reduction in earnings management activities, as firms switched to more costly but harder-to-detect real earnings management methods.This study examines real and accrual-based earnings management before and after the passage of the Sarbanes-Oxley Act (SOX) in 2002. It finds that accrual-based earnings management increased steadily until SOX was enacted, after which it declined significantly. Conversely, real earnings management activities decreased prior to SOX but increased significantly after its passage, suggesting that firms shifted from accrual-based to real earnings management methods post-SOX. The study also finds that accrual-based earnings management was particularly high in the period immediately preceding SOX. Firms that just met or exceeded earnings benchmarks used less accruals and more real earnings management after SOX compared to similar firms before SOX. The study also finds that the increase in accrual-based earnings management before SOX coincided with an increase in equity-based compensation, particularly option-based compensation. The results suggest that firms switched to real earnings management methods after SOX, which are harder to detect but more costly. The study also finds that the level of real earnings management increased after SOX, indicating a substitution effect between real and accrual-based earnings management. The study uses a variety of measures to assess earnings management, including discretionary accruals and real earnings management proxies. The results show that the overall level of accrual-based earnings management decreased from the SCA period to the post-SOX period, while the level of real earnings management increased in the post-SOX period. However, there was significantly higher earnings management, particularly income-increasing earnings management, during the SCA period compared to the pre-SCA period. The study concludes that the passage of SOX likely led to a reduction in earnings management activities, as firms switched to more costly but harder-to-detect real earnings management methods.