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Real Earnings Management and Future Performance

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  • Naila Tabassum
  • Ahmad Kaleem
  • Mian Sajid Nazir

Abstract

Managers manipulate firm’s earnings through real activities to show good performance in the current period. This article determines whether there is any impact of these earnings manipulation in future financial performance or not. A panel data analysis technique generalized least square (GLS) method was used for analysis. The sample includes 119 firms listed in Karachi Stock Exchange (KSE) for the years 2004–2011. The article provides evidence that firms engaged in real earnings management (REM) activities through sales manipulation to report higher earnings have worse financial performance in future. It reveals that earnings manipulation seems helpful and appealing in current situation but creates problems in future.

Suggested Citation

  • Naila Tabassum & Ahmad Kaleem & Mian Sajid Nazir, 2015. "Real Earnings Management and Future Performance," Global Business Review, International Management Institute, vol. 16(1), pages 21-34, February.
    • Handle: RePEc:sae:globus:v:16:y:2015:i:1:p:21-34
    DOI: 10.1177/0972150914553505
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    1. Kouaib, Amel & Jarboui, Anis, 2017. "The mediating effect of REM on the relationship between CEO overconfidence and subsequent firm performance moderated by IFRS adoption: A moderated-mediation analysis," Research in International Business and Finance, Elsevier, vol. 42(C), pages 338-352.
    2. Tuğba KAYHAN & Temur KAYHAN & Engin YARBAŞI, 2019. "Profit management in the case of financial distress and global volatile market behaviour: Evidence from Borsa Istanbul Stock Exchange," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(620), A), pages 179-192, Autumn.

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