The effect of internal control quality on real and accrual-based earnings management: evidence from France

Abstract This paper examines the effect of internal control (IC) quality, measured by IC weakness disclosures, on quality financial statements’ information, real and accrual-based earnings management. The sample consists 686 firm-year observations French non-financial companies listed in SBF 120 index during period between 2012 2018. Using ordinary least squares (OLS) generalized method moments (GMM) regression, our empirical results indicate that disclosures are positively significantly related to activities manipulation negatively associated with discretionary accruals. provides evidence a good system reduces management improves reliability statements; however, it cannot (REM). research findings practical interest not only analysts, auditors, investors—guiding them pay attention REM case weaknesses—but also regulators, who may consider additional disclosure requirements when reporting material weaknesses designing policies could help reducing practices.