Earnings management has been cast into negative light due to the recent corporate scandals and, therefore, is viewed as detrimental to the firm. Enron and Worldcom represent two of the most egregious cases of opportunistic earnings management that led to the largest bankruptcies in U.S. history....

The purpose of this study is to determine whether earning management is exacerbated or alleviated in diversified firms. An explicit distinction is made between industrial and geographic diversification. The empirical evidence shows that earnings management is mitigated by 1.8% in industrially...