Uncovering Real Earnings Management: Pay Attention to Risk-Taking Behavior

International Journal of Financial Studies

Samar Alharbi¹  Md Al Mamun²  Nader Atawnah³ 

[1] College of Administrations and Finance, Saudi Electronic University, Riyadh 13323, Saudi Arabia;Department of Economics, Finance, and Marketing, La Trobe University, Melbourne, VIC 3086, Australia;School of Business and Law, Edith Cowan University, Joondalup, WA 6027, Australia;

关键词: agency theory;    corporate governance;    risk-taking;    real earnings management;   

DOI  :  10.3390/ijfs9040053

来源: DOAJ

【 摘 要 】

We examine the impact of corporate risk-taking on firm-level real earnings management. We find that firms with higher risk-taking engage in higher real earnings management. Our results are robust to a series of robustness tests, including simultaneous least squares approach, firm fixed effect, change analysis, and pseudo difference-in-difference analysis. Additional analyses reveal that the impact of risk-taking on real earnings management is more pronounced among firms that experience prior-year loss and are run by top-echelons who are risk lovers. Sarbanes-Oxley Act (SOX) regulation does not attenuate the positive effect of risk-taking on real earnings management. However, external monitoring by institutional investors and takeover susceptibility curb the relation between risk-taking and real earnings management. Our study highlights that outsider, such as investors and regulators, should pay close attention to a firm’s risk-taking behavior to unravel the extent of real earnings management in the firm.

【 授权许可】

Unknown