Does corporate digitalisation moderate real earnings management?

We investigate the association between corporate digitalisation and firms' real earnings management (REM). Using an archival data set of 11,806 firm-year observations from the Shanghai and Shenzhen stock exchanges between 2011 and 2020, our results show a negative association between the degree of corporate digitalisation and the level of REM. Furthermore, we find that the association between corporate governance mechanisms - including power balance, board independence and audit quality - and REM is more pronounced in firms with a high degree of digitalisation. We also note that the reduction of REM resulting from corporate digitalisation has a positive effect on firms' operating efficiency.