1.2　Objectives of the study

The main purpose of this book is to examine the degree of EM in private versus public firms domiciled in the EU，and in so doing，to assess whether determinants of EM are similar for both types of firms.Through this research，the following questions will be answered.Do public firms exhibit a higher degree of EM compared to private firms？ What are the factors driving EM？For example，country-level factors （e.g.tax conformity，law and enforcement），firm-specific factors （e.g.ownership，leverage，size，performance and growth opportunity），the role of external financing，audit services，accounting standards or institutional factors （e.g.tax conformity，law and enforcement）.

Specifically，this book presents three empirical studies，each providing further evidence regarding EM in private and public firms.The first empirical study （Chapter 3） assesses the degree of EM in private and public firms domiciled in Europe，and mainly focuses on country-level factors influencing EM.In particular，this study empirically examines the level of EM in both private and public firms and compares the level of EM between those two types of firms.Furthermore，it examines the influence of IFRS adoption and financial crisis on the level of EM among European public firms.Finally，it considers other institutional factors，such as legal enforcement，investor protection and tax regimes in the analysis.

The second empirical chapter （Chapter 4） is an extension of the previous chapter by not only examining EM at the firm-level but also considering another dimension of EM which is accrual-based EM，to examine if the results differ from those obtained in chapter 3.The objective of this chapter is to offer a more comprehensive understanding of the determinants of EM in general.Two dimensions of accrual-based EM are mainly examined in this chapter：accrual quality and conditional conservatism.It then examines the impact of IFRS adoption and financial crisis in influencing firms’ EM，and considers how the firm specific factors influence the level of EM.Prior studies have reported the firm characteristics，such as leverage，size and growth opportunity，are associated with the degree of EM.To better capture the determinants of EM and further ensure that the main results are robust，it also provides a discussion on the results with a country-by-country analysis of EM.

Managerial intervention in the reporting process can occur not only via accounting estimates and methods，but also through real activities（Roychowdhury，2006）.[3]Based on the findings of Graham et al.（2005），real earnings management （REM） is recognised as a more preferred EM method among managers.Therefore，the objective of the third empirical chapter （Chapter 5） considers non-accrual earnings management，and examines the factors in the light of different incentives for EM that firms and their managers face.In particular，this study empirically compares the degree of REM between private and public firms.It then considers the impact of IFRS adoption and financial crisis on REM，and finally examines the factors affecting differential REM activities in private and public firms.