Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257798 
Year of Publication: 
2021
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 9 [Issue:] 4 [Article No.:] 53 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-18
Publisher: 
MDPI, Basel
Abstract: 
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.
Subjects: 
agency theory
corporate governance
real earnings management
risk-taking
JEL: 
G1
G3
K2
M1
M4
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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