Methodological Issues in Real Earnings Management

Journal article

Yazdifar, H., Makarem, N., Hesarzadeh, R. and Whittington, M. 2024. Methodological Issues in Real Earnings Management. Journal for International Business and Entrepreneurship Development. 15 (4), pp. 592-612. https://doi.org/10.1504/JIBED.2023.138099
AuthorsYazdifar, H., Makarem, N., Hesarzadeh, R. and Whittington, M.
Abstract

This article critically reviews the current methodologies used in earnings management research focusing on real activities manipulation studies to explore a more consistent measurement approach. Specifically, this article draws on the methodologies employed in accruals management studies to identify issues with the current measures of real activities manipulation. A survey of accounting journals conducted for the period 2008-2020 indicates that measuring aggregate accruals and specific real activities manipulation are the two most common methods used in earnings management studies. This study employs specific and aggregate approaches used in accruals management studies to provide a comparable basis. The key theme of this study is that abnormal cash flow from operations, which is currently used to measure sales manipulation, could actually serve as an aggregate measure of real activities manipulation. We also discuss why combined measures, which are currently used as aggregate measures of real activities manipulation, can be misleading.

KeywordsFinancial reporting; Earnings Management; Accruals Management; Real Activities Manipulation; Measurement
Year2024
JournalJournal for International Business and Entrepreneurship Development
Journal citation15 (4), pp. 592-612
PublisherInderscience
ISSN 1747-6763
Digital Object Identifier (DOI)https://doi.org/10.1504/JIBED.2023.138099
Web address (URL)https://www.inderscienceonline.com/doi/abs/10.1504/JIBED.2023.138099
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Output statusPublished
Publication dates
Online29 Apr 2024
Publication process dates
Accepted24 Oct 2023
Deposited07 May 2024
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