Curbing Real Earnings Management Decisions: Experimental Evidence on Pressure Effect
Dan Dacian Cuzdriorean, PhD.

Prior research documented that managers are using a variety of real earnings management practices to manage earnings. We examined in a laboratory experiment which involves 51 undergraduate and master students the impact of pressure effect on operational opportunism. Our results confirmed the effect of pressure (i.e. legal consequences, financial press scrutiny and auditor scrutiny) on real earnings management decisions, showing that participants who received pressure treatment were less inclined to opportunistic behavior when compared to those who did not received pressure information. Overall, we found that pressure effect is helpful in curbing real earnings management decisions. The paper contributes to the debate on curbing operational opportunism.

Full Text: PDF     DOI: 10.15640/jibe.v7n1a5