Consequences of real earnings management on subsequent operating performance

Gary K. Taylor and Randall Zhaohui Xu

Research in Accounting Regulation, 2010, vol. 22, issue 2, 128-132

Abstract: Using three criteria, we identify firms that may have engaged in real earnings management. We then investigate whether real earnings management activities lead to a significant decline in these firms’ subsequent operating performances. Our test results demonstrate that firms identified as conducting real earnings management activities do not experience a significant decline in subsequent operating performance. The finding enhances our understanding of the process through which management evaluates the costs and benefits of real earnings management and helps address concerns about costs of the increase in real earnings management activities that arose due to the heightened accounting regulation implemented by the Sarbanes–Oxley Act.

Keywords: Consequences of real earnings management; Subsequent performance; Sarbanes–Oxley Act; Tighter accounting regulation (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:22:y:2010:i:2:p:128-132

DOI: 10.1016/j.racreg.2010.07.008

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