Hi,

It is a difficult problem to handle, but financial restatements that result from these practices are harmful to the firm. see for example

"The economic consequences of financial restatements: Evidence from the market for corporate control" A Amel-Zadeh and Y  Zhang, The Accounting review 2015, vol 90, p 1-29.

Best regards

 go for Malaysian Indian's novelist Maniam, and analytical writings on the author's work  by Sharamini Gabriel

 thanks all. still waiting for more responses

There is no direct answer as to whether or how high  CG impact accruals management (AM) or real activities management (RAM) because they happen under different circumstances.

It is argued that managers will use discretionary accruals to shift revenues between accounting periods or in deferring expenditures and academics can break these into two components of discretionary and non-discretionary accruals. Shortcomings of AM - previous studies have found that they have a low earnings management detection power, the methods fail to consider other factors that influence earnings management such as firm size and growth rate and the use of accrual based models to detect earnings management has been further complicated by the adoption of fair value accounting approach to financial reporting

For RAM, Graham et al. (2005) and Roychowdhury (2006) indicate that manipulation can assume many forms, including under-investment in research and development (R&D), advertising, and employee training, all for the purpose of meeting short-term goals. Abnormal gains on sale of assets to avoid negative earnings or negative earnings surprises also fall under real earnings activities. Preference for real activities arise from the ease with which the manipulation can bed one given that accrual approach are based on applying generally accepted accounting principles (GAAP) or IFRS. Failure to comply with GAAP can attract severe consequences. In other words, detection of real activities can be challenging for investors. Real activities management is therefore more plausible for earnings management but Hassan et al. (2014) argue that managers are likely to resort to the manipulation of real activities only when there is limited scope left for accrual manipulation.I have seen very few studies apply RAM.

And finaly, the impact on CG depends on the accuracy of your CG measurements. Nerantzidis (2015) talks of impact of weighting on CG. So once you get the three right, we can talk of how CG impacts EM and the extent.

Some great resources:

1.Hassan, S., Rahman, R. and Hossain, S. (2014). “Corporate Accruals Practices Of Listed Companies In Bangladesh”. European Journal Of Economics And Management Vol 1: 1

2. Kothari, S., Leone, A. and Wasley, C. (2005). “Performance matched discretionary accrual Measures”. Journal of Accounting and Economics, 39(1), 163-197.

3.Kothari, S., Mizik, N. and Roychowdhury, S. (2012). “Managing for the Moment:

The Role of Real Activity versus Accruals Earnings Management in SEO Valuation”.

4.Nerantzidis, M. and Tsalavoutas, I. 2015). “Does weighting really matter? The “blind spot” of corporate governance ratings”. Working Paper DOI: 10.13140/RG.2.1.4801.5441

Avaialble at http://www.researchgate.net/publication/288835058

Kind Regards

Erick Outa

thank you very much sir

Gunny, K. A. (2010). The relation between earnings management using real activities manipulation and future performance: evidence from meeting earnings benchmarks, Contemporary Accounting Research, 27(3) (Fall 2010), 855-888.

Hi,

This paper may of interest for you:

Real Earnings Management in Sales (pages 1233–1266)MICHAEL J. AHEARNE, JEFFREY P. BOICHUK, CRAIG J. CHAPMAN and THOMAS J. STEENBURGH

Journal of Accounting Research, december 2016, vol 54 issue 5

Best regards