The impact of abnormal real earnings management to meet earnings benchmarks on future operating performance

Motivated by agency conflicts of real earnings management (e.g., opportunistic and signalling perspectives), this study investigates the association between firms that manipulate their business operations to meet benchmarks (i.e., zero earnings, last year's earnings) subsequent operating performance. We examine effects magnitude on firms' future performance for period 2009 2015 UK firms. Our analysis shows manipulation activities such as sales, discretionary expenditures, production costs has a significantly positive consequence signals good also find in absence meeting experience decline The findings research lend support our understanding process follows evaluate benefits management.