Management Control Systems and Real Earnings Management: Effects on Firm Performance

65 Pages Posted: 16 Sep 2019 Last revised: 5 Apr 2024

See all articles by Beatriz Garcia Osma

Beatriz Garcia Osma

Universidad Carlos III de Madrid ; European Corporate Governance Institute (ECGI)

Jacobo Gomez-Conde

Universidad Autónoma de Madrid - Accounting Department

Ernesto Lopez-Valeiras

Universidade de Vigo

Date Written: December 15, 2021

Abstract

We examine an unexplored side of management control systems (MCS): their links with real earnings management. We propose that interactive use of MCS supports management in identifying, evaluating, selecting, and implementing real actions that conceptually would be classified as real earnings management (REM). Interactive MCS use is also predicted to enhance managerial REM actions that retain the focus of the organization on its strategic objectives, leading to higher future performance. We test our research model empirically with survey and archival data. The results support our predictions. Finally, we explore the role of other levers of control.

Keywords: Real earnings management, Management control systems, Interactive use, Levers of control

JEL Classification: M41

Suggested Citation

Garcia Osma, Beatriz and Gomez-Conde, Jacobo and Lopez-Valeiras, Ernesto, Management Control Systems and Real Earnings Management: Effects on Firm Performance (December 15, 2021). Management Accounting Research, Available at SSRN: https://ssrn.com/abstract=3449178 or http://dx.doi.org/10.2139/ssrn.3449178

Beatriz Garcia Osma

Universidad Carlos III de Madrid ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jacobo Gomez-Conde (Contact Author)

Universidad Autónoma de Madrid - Accounting Department ( email )

Campus de Cantoblanco
Madrid, Madrid 28049
Spain

Ernesto Lopez-Valeiras

Universidade de Vigo ( email )

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