The interaction between real and accrual-based earnings management: analysis based on the mandatory IFRS adoption

Abstract

The main purpose of this paper is to examine the relation between real and accrual-based earnings management after the mandatory IFRS adoption. I focus on a sample of 124 firms drawn from the 250 French-listed companies during the period from 1999 to 2011. Empirical results indicate that French firms use real activities manipulation and discretionary accruals as complementary tools to smooth earnings. Finally, unlike previous studies, I don’t find evidence of the sequential nature between the two earnings management strategies.