Accrual vs. Real Earnings Management in Internationally Diversified Firms: The Role of Institutional Supervision

This study investigates whether internationally diversified firms substitute between accrual-based and real earnings management and examines how institutional supervision moderates this relationship. Drawing on a sample of Taiwanese firms listed on the Taiwan Stock Exchange from 2003 to 2016, we conduct regression analyses to test our hypothesis. We find that internationally diversified firms actively shift between accrual and real earnings management strategies depending on the constraints they face. Specifically, firms tend to rely more on accrual-based manipulation when information asymmetry is high and switch to real earnings management when accruals are more easily detected. We also show that stronger institutional supervision—measured by information transparency and investor protection—significantly curbs accrual-based earnings management. These findings reflect the higher volatility and agency problems associated with international operations, such as exposure to foreign risks and the distance between parent and subsidiary firms. By highlighting the conditions under which firms manage earnings and the supervisory mechanisms that constrain such behavior, this study offers practical insights for managers seeking to smooth earnings, investors aiming to evaluate firm transparency, and policymakers designing regulations to deter opportunistic financial reporting.

Authors

Institutions

Publication Details

Journal
Journal of risk and financial management
Published
2025-07-21
DOI
https://doi.org/10.3390/jrfm18070404
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Accrual vs. Real Earnings Management in Internationally Diversified Firms: The Role of Institutional Supervision

Yun-Sheng Hsu, Jawad Asif, Qian Long Kweh, Yan‐Jie Yang
Journal of risk and financial management
Auditing, Earnings Management, Governance
article

Accrual vs. Real Earnings Management in Internationally Diversified Firms: The Role of Institutional Supervision

Yun-Sheng Hsu, Jawad Asif, Qian Long Kweh, Yan‐Jie Yang
article en

Abstract

This study investigates whether internationally diversified firms substitute between accrual-based and real earnings management and examines how institutional supervision moderates this relationship. Drawing on a sample of Taiwanese firms listed on the Taiwan Stock Exchange from 2003 to 2016, we conduct regression analyses to test our hypothesis. We find that internationally diversified firms actively shift between accrual and real earnings management strategies depending on the constraints they face. Specifically, firms tend to rely more on accrual-based manipulation when information asymmetry is high and switch to real earnings management when accruals are more easily detected. We also show that stronger institutional supervision—measured by information transparency and investor protection—significantly curbs accrual-based earnings management. These findings reflect the higher volatility and agency problems associated with international operations, such as exposure to foreign risks and the distance between parent and subsidiary firms. By highlighting the conditions under which firms manage earnings and the supervisory mechanisms that constrain such behavior, this study offers practical insights for managers seeking to smooth earnings, investors aiming to evaluate firm transparency, and policymakers designing regulations to deter opportunistic financial reporting.

Journal of risk and financial managementVol. 18(7)
National Chung Hsing University (TW), Canadian University of Dubai (AE), University of Gujrat (PK), Yuan Ze University (TW)
Openalex Percentile: Top 74%
Auditing, Earnings Management, Governance
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.

Accrual vs. Real Earnings Management in Internationally Diversified Firms: The Role of Institutional Supervision — Yun-Sheng Hsu, Jawad Asif, et al. · Journal of risk and financial management (2025) | TGRS Research Map | TGRS