We present evidence that the managers of Indian firms fixate on operating profits, and thus manage such earnings. Specifically, they shift operating expenses to income-decreasing special items in order to inflate operating earnings (McVay, 2006. The Accounting Review, 81(3), 531). We also shed...

We present first evidence that the manipulation of operating cash flows through misclassification is likely to be more common in the countries with weak investor protection and governance. We also show that managers manipulate operating cash flows using different misclassification strategies....

The paper examines whether financial distress and its severity have a role to play in managers' decisions with respect to the choice of earnings management strategies. The results suggest that firms in initial stages of distress engage in real earnings management through a reduction in the...