Use of controllable non‐operating items as a means to manage earnings in Korea

This study empirically examined how prevalent earnings management practices are among Korean firms during the period 1994 and 1997. Specifically, this study focuses on the use of controllable non‐operating items as tools of earnings management when they face unwanted operating performances caused by uncontrollable non‐operating items. We expect that firms with extreme operating and/or non‐operating performances will utilize controllable non‐operating real transaction accruals to offset or mitigate extreme performance.