Myopia and earnings management strategies

Abstract

In this study, we investigate how country-level myopia affects managers’ willingness to engage in earnings management and choice of earnings management strategy. Using a comprehensive dataset of 47 countries for the time period from 2003 to 2015, we find that firms in short-term oriented cultures engage in more real earnings management, while firms in long-term oriented cultures rely on earnings management through accruals manipulation. Furthermore, we find a larger discontinuity around earnings benchmarks in long-term oriented cultures suggesting that utilization of AM enables benchmark beating with high precision.