Real Earnings Management, Institutional Environment, and Future Operating Performance: An International Study

Haiyan Jiang, Ahsan Habib and Snow Wang

The International Journal of Accounting, 2018, vol. 53, issue 1, 33-53

Abstract: This paper investigates the association between firms' engagement in real activities manipulation (hereafter REM) on future firm performance in an international setting, and whether the association is conditional upon country-level institutional factor. Our inquiry is motivated by a paucity of research on the consequences of REM in an international setting. Using a large sample over the period of 2001 to 2015, we find that current-period REM is positively associated with future performance: a finding that is consistent with Gunny (2010) in the US. Importantly, we find that the positive performance effect is driven by firms operating in countries with strong institutional environments. Finally, we find that future operating performance improves when REM is undertaken by firms in strong institutional environments only during a non-economic crisis period, but not during an economic crisis period. The paper adds to the existing REM literature by showing a non-monotonic effect of REM on future performance that is conditional on the strength of a country's institution. We also contribute to the accounting information and crisis literature by documenting a time-variant effect of REM on future performance.

Keywords: Real earnings management; Institutional environment; Firm performance (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0020706316301479
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:53:y:2018:i:1:p:33-53

DOI: 10.1016/j.intacc.2018.02.004

Access Statistics for this article

The International Journal of Accounting is currently edited by A. R. Abdel-Khalik

More articles in The International Journal of Accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().