Corporate Life Cycle and Real Earnings Management: The Role of Earnings Benchmarks

This study investigates real activities manipulation to meet earnings benchmarks across corporate life cycle stages. Focusing on prioritization, magnitude, and mechanisms, we show that growth and mature firms focus on avoiding earnings decreases, while declining firms prioritize avoiding losses. The magnitude of real activities manipulation follows a U-shaped pattern, peaking in the introduction and decline stages. While both utilize sales manipulation, motives diverge: introduction firms signal growth, whereas declining firms aim for survival. Integrating earnings distribution and regression analyses, this research provides novel insights into the dynamic evolution of earnings management throughout the corporate life cycle.