EARNINGS MANAGEMENT: A LITERATURE REVIEW ON TRENDS, THEORETICAL DEVELOPMENTS, AND MAJOR FINDINGS

Abstract

This study aims to map the development of earnings management research over time by reviewing relevant academic literature based on research trends, theoretical developments, and major findings. This study employs a qualitative literature review approach, using published from 1990s to 2025 were selected based on relevance and contribution to the theoretical and empirical development. This review found that earnings management is mainly based on agency theory, and later supported by positive accounting theory, signaling theory, and stakeholder theory. In practice, earnings management is done to meet targets, get bonuses, avoid loan problems, prepare for IPOs, or reduce political pressure. It can be done through changes in accounting (accrual-based) or real business actions (real earnings management). Earnings management can reduce trust in financial reports, cause wrong market decisions, and lead to legal or reputation problems. This study is expected to enrich the body of literature on the development of management accounting research and provide a theoretical foundation for future research.