Title: Misusing the value relevance of accounting information for manipulation

Authors: Radim Procházka; George Emmanuel Iatridis

Addresses: Department of Finance, Faculty of Economics and Administration, Masaryk University, Czech Republic ' Department of Economics, University of Thessaly, Volos, Greece; College of Administrative Sciences and Economics, Koc University, Istanbul, Turkey

Abstract: This study examines how the value relevance of accounting information affects both real activities manipulation and accrual earnings management. Several studies have shown that the relevance of financial data in valuation varies among firms with differing levels of intangible and tangible assets. The value relevance in earnings management could be a double-edged sword since manipulating one specific item may reduce the overall valuation effect for a firm. Thus, we focused on the effect of intangible intensity on different types of performance manipulation as a motivation in the context of value relevance by deploying three types of real activities manipulation and accrual earnings management models. We found evidence that managers manipulate financial items to achieve the highest value relevance, particularly in relation to performance-related information. The results show that managers exploit knowledge about accounting information's value relevance to opportunistically affect stock prices.

Keywords: real earnings manipulation; real activities manipulation; accrual earnings management; value relevance; intangibility; new economy.

DOI: 10.1504/IJBAAF.2025.151869

International Journal of Banking, Accounting and Finance, 2025 Vol.15 No.3, pp.312 - 345

Received: 14 Mar 2024
Accepted: 15 Feb 2025
Published online: 24 Feb 2026 *

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