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This research paper aims to examine the effect of chief executive officer (CEO) characteristics on earnings management.

Research samples are manufacturing firms listed in the Indonesian Stock Exchange 2015–2021. CEO characteristics include narcissism, gender, age, tenure, experience, nationality and founding family status. Data analysis uses random-effect regression.

The result shows that higher narcissism CEOs have aggressive characteristics so they will be more likely to engage in accrual and real earnings management. Female CEOs, foreign CEOs and founding-family CEOs have higher monitoring and business ethics characteristics so they will be less likely to engage in accrual and real earnings management. CEOs with higher education levels have higher thinking complexity so they will be more likely to engage in accrual earnings management with higher regulator and auditor monitoring barriers than real earnings management. CEOs with financial and accounting experience are familiar with accounting standards and auditor monitoring barriers so they will be more likely to engage in accrual earnings management than real earnings management. On the other hand, there are no effects of CEO age and tenure on earnings management.

This research contributes to providing evidence of the effect of CEO characteristics on earnings management in a specific industry such as manufacturing firms and emerging markets such as Indonesia with the majority group firms being family firms.

This paper examines how board structure influences real earnings management and the interaction effect of CEO narcissism on board structure-real earnings management relationship.

The authors used panel data derived from secondary sources from publicly listed firms in Kenya during 2002–2017. Hierarchical regression analysis was used to test the hypotheses.

The results indicate that board independence, board tenure and size have significant negative effect on real earnings management, while CEO duality positively affects real earnings management. Further, the interaction results show that CEO narcissism moderates the relationship between CEO duality and real earnings management.

The results suggest that real earnings management reduces when boards are independent, large and comprising of long-tenured members. However, when the CEO plays dual role of a chairman, real earnings management increases. The authors also find that when CEOs are narcissists, the monitoring role of the board is compromised.

The study adds value to the understanding of how board structure and CEO narcissism influence the monitoring role of the board among firms listed at Nairobi Securities Exchange.

Emerging markets are characterized by weak institutions and strong relationships, which give rise to different market characteristics in supply chain relationships. This study investigates the impact of customer concentration on suppliers' real earnings management.

Based on China's relationship-based transaction, this study selects 2007–2019 Shenzhen and Shanghai Stock Exchange A-share manufacturing listed companies as the research samples. The empirical analysis is derived from the ordinary least square regression model with industry and year fixed effects, and cross-sectional analysis is used for further analysis.

It is found that the higher the degree of customer concentration, the more likely a company is to engage in real earnings management mainly through discretionary expenses instead of accrual-based earnings management. Further research shows that when suppliers provide customers with higher commercial credit and make more relationship-specific investments, and when major customers are also major suppliers, the effect of customer concentration on real earnings management is more significant. It can be seen from the results that high customer concentration is beneficial for suppliers to cooperate with major customers in emerging markets.

This research expands the relationship between customer relationship-based transaction and earnings management from the perspective of collaboration. These conclusions are of great significance for market regulators to reform information disclosure related to customers and for participants to pay attention to the composition of major customers of the company.

This study investigates the relationship between management's psychological characteristics (managers' narcissism, overconfidence and managers' myopia) and earnings management in the pre-Islamic State of Iraq and Syria (ISIS) and post-ISIS eras.

A multivariate regression model was used to test the hypotheses. The research hypotheses were tested using a sample of all companies listed on the Iraqi Stock Exchange from 2014 to 2020.

Findings indicate a positive and significant relationship between managers' narcissism, overconfidence and myopia with accrual and real earnings management. According to the results, the ISIS weakens the relationship between managers' narcissism, managers' overconfidence and managers' myopia with accrual and real earnings management.

Because no study has addressed this issue in Iraq so far, the results of this research can provide helpful information for its users and improve the knowledge and science in this area.

This study aims to see the moderating effect of board diversity on the relationship between ownership structure and real earnings management.

This study uses unbalanced panel data of 75 listed energy firms (346 firm-year observations) from three South Asian emerging economies (Bangladesh, India, and Pakistan) from 2015 to 2019. The two-step system GMM estimation is used for data analysis. This study also uses fixed effect regression to obtain robust findings.

The findings show that firms with a greater ownership concentration and managerial ownership significantly reduce real earnings management. In contrast, the data refute the idea that institutional and foreign ownership affect real earnings management. We also find that board diversity interacts significantly with ownership concentration and managerial ownership, meaning that board diversity moderates the negative link of the primary relationship that reduces real earnings management. On the other hand, board diversity has no interaction with institutional and foreign ownership, implying no moderating effect exists on the primary relationship.

To the best of the authors’ knowledge, this is unique research investigating how different ownership structures affect real earnings management in the emerging nations’ energy sector, which the earlier studies overlook. More specifically, this research focuses on how board diversity moderates the relationships between ownership structure and real earnings management, which could be helpful for future investors.

In this study, the author examines the effect of managers’ perception of product market competition on accruals and real earnings management.

The author develops a new text-based measure of the emphasis managers place on product market competition by conducting a textual analysis of firms’ 10-K filings. Using this measure, the author conducts a battery of econometric analyses and robustness checks to investigate the impact of this measure of product market competition on measures of accruals and real earnings management.

This study finds robust evidence that when management perceives more competitive threats, they are more likely to engage in accruals-based earnings manipulation but are less likely to engage in real earnings management activity. The author argues that these findings are due to managers’ career concerns enticing them to manage earnings via accrual when competition is high, but that greater product market competition discourages real earning management activity as it can diminish firms’ competitiveness.

The findings of this paper have important policy and practical implications since it signals that managers’ perceptions of product market competition is able to affect accounting choices, information environments and economic outcomes in firms.

This study develops a new text-based measure of managers’ perception of product market competition with the aid of GPT-4. The author then using this measure provides firm-level evidence on how this relates to earnings management.

This study examines the investment horizon influence, mediated by market optimism, on earnings management based on accruals and real activities. Based on short-termism, the authors argue that earnings management increases in optimistic periods to boost corporate profits.

The authors analyzed non-financial Brazilian publicly traded firms from 2010 to 2020 by estimating industry-fixed effects of groups of short- and long-horizon firms to compare their behavior on earnings management practices during bullish moments. For robustness, the authors used alternate measures and trade-off analyses between earning management practices.

The findings indicate that, during bullish moments, companies prioritize managing their earnings through real activities management (RAM) rather than accruals earnings management (AEM), depending on their time horizon. The results demonstrate the trade-off between earnings management practices.

This study presents limitations when using proxies for earnings management and investor sentiment.

Investors and regulators should closely monitor companies' operations, especially during bullish market conditions to prevent fraud.

The study addresses investor sentiment mediation in the earnings management discussion, introducing the short-termism approach.

Prior studies generally focus on income smoothing through discretionary accruals and document that managers have incentives to smooth earnings due to various reasons. This paper aims to focus on income smoothing through research and development (R&D) management and examine whether and how income smoothing through R&D management affects credit rating agencies’ perception of firm risk.

The authors use financial statement data from the CRSP/Compustat Merged data set universe for the period from 1992 to 2019 after excluding financial and utility industries. The authors follow the model for credit ratings used in previous literature to test the hypothesis. Specifically, the authors use an ordered probit model to express credit ratings as a function of income smoothing attributes.

The authors find that R&D-based income smoothing improves a firm’s credit rating. However, the positive effect of R&D-based income smoothing on credit ratings is less than that of accruals-based income smoothing. This study also shows that the positive effect of R&D-based income smoothing is more pronounced for firms less subject to opportunistic incentives, further strengthening the notion that managers smooth earnings through R&D management to provide more informative earnings.

This study contributes to the income smoothing literature in several ways. First, the authors contribute to the research by showing that managers’ income smoothing activity through R&D management positively affects firms’ credit rating. Second, the authors also document the relative benefits of the two different income smoothing techniques in terms of improving credit agencies’ perception of firms’ creditworthiness.

The authors empirically investigate the association between acquisition, ownership structure and accrual earnings management (AEM) on real earnings management (REM) using Gulf Cooperation Council (GCC)-listed firms' context.

The authors' sample consists of 1,892 firm-year observations for the period from 2007–2017, and the authors adopt a panel data approach in investigating the interrelationships in this study. The authors employ different econometrics approach to test the authors' hypotheses.

The findings reveal that acquiring companies engage more in AEM if compared to REM. In terms of ownership structure, institutional ownership and state ownership mitigate the engagement in REM, whereas foreign ownership is found to be an ineffective mechanism in reducing engagement in REM. The authors report similar findings on ownership structure for AEM. The authors also find that the GCC firms engage more in REM when the firms engage in AEM, suggesting a complementary relation between these two earnings management techniques. These findings are robust after controlling for different aspects including any endogeneity issue in the authors' models.

The authors' research highlights the importance of understanding REM and AEM dynamics in GCC context. Also, the authors' findings on ownership structure suggest that GCC-listed firms can gain from institutional and state ownership which restricts earnings management, improving firm transparency and subsequently impacting firm performance.

The purpose of this study is to examine how lenders alter their behavior when faced with real earnings management.

This study uses the incremental R-square approach as in Kim and Kross (2005) to examine how much lenders rely on income statement and balance sheet ratios as the degree of real earnings management increases.

As real earnings management affects mostly the income statement, the authors find that lenders rely less on income statement ratios in making credit decisions in the presence of real earnings management. The authors also find that lenders do not alter their reliance on balance sheet ratios when faced with real earnings management.

This paper is the first to study how lenders alter their reliance on financial statements in making credit decisions in the presence of real earnings management. The findings of this paper could help the regulators set standards to improve the usefulness of financial statements. The findings of this paper could also help practitioners (borrowers and lenders) understand how real earnings management affects credit decisions.