The paper examines the trends in accrual-based and real earnings management activities in the period leading up to and following the passage of the Sarbanes-Oxley Act (SOX) in 2002. The authors find that accrual-based earnings management increased steadily from 1987 until the passage of SOX, followed by a significant decline after SOX. Conversely, real earnings management activities declined before SOX and increased significantly after its passage, suggesting a shift from accrual-based to real earnings management methods. The study also finds that accrual-based earnings management was particularly high in the period immediately preceding SOX, and that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX compared to similar firms before SOX. Additionally, the increase in accrual-based earnings management in the period preceding SOX was concurrent with an increase in equity-based compensation, particularly option-based compensation. The results contribute to the debate on the pervasiveness of earnings management and the impact of SOX on such behavior, suggesting that firms may have switched to more costly but harder-to-detect earnings management techniques after SOX.The paper examines the trends in accrual-based and real earnings management activities in the period leading up to and following the passage of the Sarbanes-Oxley Act (SOX) in 2002. The authors find that accrual-based earnings management increased steadily from 1987 until the passage of SOX, followed by a significant decline after SOX. Conversely, real earnings management activities declined before SOX and increased significantly after its passage, suggesting a shift from accrual-based to real earnings management methods. The study also finds that accrual-based earnings management was particularly high in the period immediately preceding SOX, and that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX compared to similar firms before SOX. Additionally, the increase in accrual-based earnings management in the period preceding SOX was concurrent with an increase in equity-based compensation, particularly option-based compensation. The results contribute to the debate on the pervasiveness of earnings management and the impact of SOX on such behavior, suggesting that firms may have switched to more costly but harder-to-detect earnings management techniques after SOX.