This paper investigates and compares the earnings management strategies of listed and unlisted firms during situations involving financial difficulties. The evidence from a sample of 6,407 French non-financial entities from 2009 to 2016 shows that, in the presence of severe financial problems,...

The present paper aims to provide empirical evidence regarding the impact of shareholder activism on earnings management. Specifically, it is focused on investigating the moderating role of an external governance mechanism such as external audit quality. Based on a sample of French companies...

Prior research finds that the Sarbanes-Oxley Act (US-SOX) of 2002 has affected earnings management in the United States. Cohen et al. (2008) indicate that accrual-based earnings management has declined since the passage of US-SOX, while real earnings management has increased. Further, Gilliam et...

During 2005 to 2007, the SEC ordered a pilot program in which one-third of the Russell 3000 index were arbitrarily chosen as pilot stocks and exempted from short-sale price tests. Pilot firms' discretionary accruals and likelihood of marginally beating earnings targets decrease during this...

We examine whether initial public offering (IPO) firms exercise discretion over an individual accrual account on the balance sheet - the allowance for uncollectible accounts - and an individual accrual account on the income statement - bad debt expense. Our research design exploits a unique...

The literature suggests that real earnings management (REM) activities can increase adverse selection-risk in capital markets. Due to their opacity and the difficulties in understanding their implications, REM strategies may increase the level of information asymmetry among investors. This paper...

A significant amount of earnings management (EM) research has treated managers' EM decision processes as a “black box”. The objective of this study is to begin to open the black box though examining the relative importance of economic factors as well as ethical considerations in managers' EM...

Barton (2001) and Pincus and Rajgopal (2002) show that earnings management through discretionary accruals and derivative hedging are partial substitutes in smoothing earnings before 1999. In this study, we investigate whether FAS 133 regarding hedge accounting in 2000 has influenced the relative...

We provide evidence on the effects of corporate lobbying on earnings management (EM). We argue that corporate lobbying provides firms with some degree of political protection from enforcement of laws and regulations. Thus, lobbying firms face a lower threat of enforcement which in turn reduces...

This paper studies how mandating higher book-tax conformity influences a manager's strategy to misreport financial and taxable incomes in the presence of a financial auditor and subsequently a tax auditor. The main result is that allowing for some differences between GAAP and tax laws minimizes...