This paper\u00a0reviews the literature\u00a0on earnings management and\u00a0its implications\u00a0for\u00a0managers and relevant stakeholders.<\/p>\n
Abstract<\/strong>: Accounting scandals such as Enron, Toshiba, Gowex or Pescanova are issues of special interest, given the impact that such fraudulent transactions have on society due, especially to earnings manipulation. The aim of this paper is to review the literature concerning earnings management and the implications of the latter for stakeholders and firms. Using the Web of Science database, I investigate the most cited papers on this topic. A classification of the causes that drive managers to manipulate earnings is presented. I also explore the papers that show the trade-off faced by managers among the two techniques usually recognised in the earnings management literature, real activity and accrual manipulation, and when they are normally used. One of the major implications of earnings management is the deterioration of information quality in the financial statements, which could mislead stakeholders\u2019 decisions.<\/p>\n Keywords:<\/strong> Earnings management, accrual manipulation, real activity manipulation, consequences of earnings management, causes of earnings management<\/p>\n Author: <\/strong>Cinthia Valle Ruiz, PhD student of Business Administration doctorate, Complutense University of Madrid, Madrid, Spain, cinvalle (at) ucm.es<\/a><\/p>\n