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This study examines the financial determinants of earnings management (EM) in emerging markets through the example of Brazil listed companies operating in the real estate industry. Companies are observed over the crisis period 2007-2015. To estimate discretionary accruals, we apply the Modified Jones model (Dechow et al., 1995), considered the most frequently used method for assessing the EM. In doing so, this research investigates the model’s variables that may have a great impact on the presence of accounting frauds. The results from the Pooled regression analysis reveal that, on the whole population, the variable ΔREVt–RECt measuring the management discretion over the recognition of revenue on credit sales is not significant in predicting EM. We demonstrate that in the Brazilian real estate industry the management discretion to accrue revenues at year-end when the cash is not yet received might not produce an increase in EM practices. On the other hand, we found a significant relationship between EM practices and a determinant of corporate governance: The insider shareholding.
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