Stock market listing and real earnings management in a debt-oriented country: Evidence from Japan

Abstract

This study examines the real earnings management of listed and unlisted Japanese firms. Stock market listings can increase firms' incentives to provide transparent accounting information, while it can induce earnings management. Using propensity score matching, we find that listed firms engage in real earnings management less than unlisted firms. Additional analyses reveal that listed firms that do not rely on debt financing reduce real earnings management. Our findings suggest that stock market listings increase firms' incentives to provide investors with transparent financial information.

Keywords: stock market listing, unlisted firms, managerial myopic behavior, real earnings management, Japan

JEL Classification: G32, M41