Listed companies' choice of earnings management strategies

The article, based on the new accounting standards, makes empirical study on the listed companies' choice between, pretax earnings management activities that have current income tax consequences (book-tax `conforming earnings management') and earnings management activities that do not have current income tax consequences (book-tax `nonconforming earnings management'). Our study also investigates firm-specific characteristics that impact the choice between, these earnings management strategies. The empirical results show that when firms have motivations to turn losses into gains and to decrease the punishing cost due to fraud being found, firms tend to choose conforming earnings management. This study provides a better understanding of the relationship between management's motivation and the choice of earnings management strategies.