Is earnings management sensitive to discount rates?

Jesper Per Alexander Haga, Kim Ittonen, Per Christen Tronnes, Leon Wong

Research output: Contribution to journalArticleScientificpeer-review

9 Citations (Scopus)


We argue that managers’ choice to manage earnings depends on the trade-off in the present value of expected future net benefits associated with that choice. Specifically, we examine if discount rates are associated with the likelihood that managers engage in earnings management to meet or beat various earnings targets. We find that discount rates are positively associated with income-increasing earnings management. This means that managers increase both accrual-based and real earnings management when discount rates are higher. However, the economic magnitude of this association is relatively moderate.
Original languageEnglish
Peer-reviewed scientific journalJournal of Accounting Literature
Issue numberDecember
Pages (from-to)75-88
Number of pages14
Publication statusPublished - 2018
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • Earnings management
  • accruals
  • real activities manipulation
  • discount rates


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