Uncovering Real Earnings Management: Pay Attention to Risk-Taking Behavior

We examine the impact of corporate risk-taking on firm-level real earnings management. find that firms with higher engage in Our results are robust to a series robustness tests, including simultaneous least squares approach, firm fixed effect, change analysis, and pseudo difference-in-difference analysis. Additional analyses reveal management is more pronounced among experience prior-year loss run by top-echelons who risk lovers. Sarbanes-Oxley Act (SOX) regulation does not attenuate positive effect However, external monitoring institutional investors takeover susceptibility curb relation between study highlights outsider, such as regulators, should pay close attention firm’s behavior unravel extent firm.