Stock market listing status and real earnings management

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4 Citations (Scopus)

Abstract

This study analyzes real earnings management among privately held versus publicly listed firms. Our first finding is that public firms engage in more earnings management through operating activities. When a clear incentive to manage earnings in a specific direction is present we continue to find that public firms manage their earnings more than private firms. We reason that capital market pressure and ownership characteristics drive our results. Additional analyses reveal that public firms employ more real earnings management as a proportion of the total earnings management strategy. Furthermore, we find that mitigating factors of real earnings management have stronger impact in public firms. This study contributes to literature on non-accrual earnings management and to the broader understanding about the private vis-à-vis public firm reporting and operating behavior. Finally, we contribute by identifying an important societal cost of stock market listing, which is the increase in potentially value-destroying real earnings management.
Original languageEnglish
Peer-reviewed scientific journalJournal of Accounting and Public Policy
Volume37
Issue number5
Pages (from-to)420-435
Number of pages16
ISSN0278-4254
DOIs
Publication statusPublished - 15.10.2018
MoE publication typeA1 Journal article - refereed

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Keywords

  • 512 Business and Management
  • Listing status
  • Earnings management
  • Opportunistic behavior
  • Private firms
  • Public versus private
  • Real earnings management

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