Earnings Management. An overview of the relative literature

Abstract

This article aims to present a critical overview of the traditional studies in earnings management, focusing on the impact on the making decision process. This overview in the literature provides numerous aspects of this topic, in line with the firms’ motivations. Earnings management procedure includes smoothing and opportunistic practices and illustrating accounting rules with a significant effect on accounting information quality. Several researchers have shifted their attention to real activities as a primary method or supplementary to accrual-based methods to obtain a complete view of the earnings management levels. Earnings management is considered an opportunistic instrument, and it can be part of the aggregate longterm business strategy. This review study provides some guidelines, to academics and professionals, in line with the models and the motivations that lead managers to engage in this procedure. This overview creates new research avenues enhancing the existing knowledge.