Abstract
ABSTRACT Real Activities Manipulation (RAM) is an earnings management technique that is increasingly being used by managers. RAM is a purposeful action by managers to manipulate earnings by altering operations, finances, and investments. In this study, we investigate the effects of reporting frequency and the knowledge that financial analysts view RAM negatively on the likelihood of management engaging in RAM. Based on the results of an online experiment with 73 experienced managers and MBA students, we find that more frequent financial reporting significantly reduces managers' likelihood to engage in sales-related RAM when they are also informed that analysts view RAM negatively. As a result, the combination of more frequent reporting and the knowledge that analysts view RAM negatively, taken together, may assist in deterring managers' engagement in sales-related RAM.
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