Real Earnings Management and Accrual-based Earnings Management
Research Article
Open Access
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Real Earnings Management and Accrual-based Earnings Management

Ziyan Gu 1*
1 Southeast University
*Corresponding author: 213240079@seu.edu.cn
Published on 30 July 2025
Volume Cover
AEMPS Vol.206
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-295-9
ISBN (Online): 978-1-80590-296-6
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Abstract

Against the backdrop of the rapid development of the capital market and increasingly fierce corporate competition, earnings engagement, working as an important means for enterprises to adjust financial information, has attracted much attention regarding its rationality and potential risks. Enterprises influence financial statements through earnings management to achieve certain effects, which may mislead investors’ decisions and disrupt the efficiency of resource allocation in the capital market. Therefore, in-depth research on it is of great practical significance. This study focuses on real earnings management and accrual-based earnings management in corporate financial management. By comparing and analyzing their operational mechanisms, specific measures, differential characteristics, and industry application scenarios, it aims to reveal the motives, means, and governance paths of earnings management. The study finds that real earnings management adjusts earnings through constructing real transactions, such as production manipulation and related party transactions, which directly affect corporate cash flows and business activities. While accrual-based earnings management adjusts profits by virtue of accounting policy choices, which act more on financial statement data. These two types of earnings management show differentiated characteristics and applications in the manufacturing industry and service industry. In view of their respective disadvantages, this paper puts forward adjustment measures such as improving accounting standards, strengthening internal governance, and enhancing audit quality, so as to provide references for enterprises to standardize financial operations and optimize regulatory policies.

Keywords:

Earnings Management, Real Earnings Management, Accrual-based Earnings Management

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Gu,Z. (2025). Real Earnings Management and Accrual-based Earnings Management. Advances in Economics, Management and Political Sciences,206,86-94.

References

[1]. Xinyi Shao. Discussion on Corporate Earnings Management Motivation and ESG Performance [J] Scientific Consultation, 2024, (15): 14-17.

[2]. Ping Wu. Research on Earnings Management Methods and Motivation of Logistics Enterprises [J] China Storage & Transport, 2025, (04): 177-178. DOI: 10.16301/j.cnki.cn12-1204/f.2025.04.122.

[3]. Roychowdhury, S. (2006). Earnings Management through Real Activities Manipulation [J] Journal of Accounting and Economics, 42(3): 335-370.

[4]. SEC. Accounting and Auditing Enforcement Release No. 9212 [EB/OL]. (2018) [2025-06-28]. https: //www.sec.gov/enforce/accounting-and-auditing-enforcement-releases/9212.

[5]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure [J] Journal of Financial Economics, 3(4): 305-360.

[6]. Bereskin, A., Johnson, W. B., & Zhang, W. (2018). Real earnings management and corporate fraud. Journal of Financial Economics, 129(2): 266-286.

[7]. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review, 70(2): 193-225.

[8]. Cohen, D. A., Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. The Accounting Review, 85(3): 1051-1077.

[9]. Huacheng Wang, Yan Tong. Controlling Shareholders and Earnings Quality: An Investigation Based on Earnings Response Coefficients [J]. Accounting Research, 2006, (2): 66-74.

[10]. Xiang Cai, Haiyan Zhang. Earnings Management of Listed Companies in China: Methods and Motivation——Empirical Evidence from 2003 [J]. Economic Management, 2005, (9): 62-69.

[11]. Eastman Kodak Company. (2001). [Annual Report on Form 10-K for the year ended December 31, 2000]. U.S. Securities and Exchange Commission.

[12]. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control [J] Journal of Law and Economics, 26(2): 301-325.

References

[1]. Xinyi Shao. Discussion on Corporate Earnings Management Motivation and ESG Performance [J] Scientific Consultation, 2024, (15): 14-17.

[2]. Ping Wu. Research on Earnings Management Methods and Motivation of Logistics Enterprises [J] China Storage & Transport, 2025, (04): 177-178. DOI: 10.16301/j.cnki.cn12-1204/f.2025.04.122.

[3]. Roychowdhury, S. (2006). Earnings Management through Real Activities Manipulation [J] Journal of Accounting and Economics, 42(3): 335-370.

[4]. SEC. Accounting and Auditing Enforcement Release No. 9212 [EB/OL]. (2018) [2025-06-28]. https: //www.sec.gov/enforce/accounting-and-auditing-enforcement-releases/9212.

[5]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure [J] Journal of Financial Economics, 3(4): 305-360.

[6]. Bereskin, A., Johnson, W. B., & Zhang, W. (2018). Real earnings management and corporate fraud. Journal of Financial Economics, 129(2): 266-286.

[7]. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review, 70(2): 193-225.

[8]. Cohen, D. A., Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. The Accounting Review, 85(3): 1051-1077.

[9]. Huacheng Wang, Yan Tong. Controlling Shareholders and Earnings Quality: An Investigation Based on Earnings Response Coefficients [J]. Accounting Research, 2006, (2): 66-74.

[10]. Xiang Cai, Haiyan Zhang. Earnings Management of Listed Companies in China: Methods and Motivation——Empirical Evidence from 2003 [J]. Economic Management, 2005, (9): 62-69.

[11]. Eastman Kodak Company. (2001). [Annual Report on Form 10-K for the year ended December 31, 2000]. U.S. Securities and Exchange Commission.

[12]. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control [J] Journal of Law and Economics, 26(2): 301-325.

Cite this article

Gu,Z. (2025). Real Earnings Management and Accrual-based Earnings Management. Advances in Economics, Management and Political Sciences,206,86-94.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: Digital Transformation in Global Human Resource Management

ISBN: 978-1-80590-295-9(Print) / 978-1-80590-296-6(Online)
Editor: Florian Marcel Nuţă Nuţă, An Nguyen
Conference website: https://www.icemgd.org/committee.html
Conference date: 26 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.206
ISSN: 2754-1169(Print) / 2754-1177(Online)

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