While the extant empirical literature on earnings management focuses on incentives, constraints and consequences in US listed companies, we present results on nonlisted companies that operate in a continental European environment (Belgium); and we consider not just the effects of internal mechanisms and external auditing but also of stakeholder relations. Methodologically, special care is taken of an errors-in-variables problem induced by a two-step procedure. We find clear evidence that earnings are managed (downward) for tax purposes, but also that relationships with banks and suppliers act as a restraining factor in this field. Another factor of moderation of downward manipulation appears to be a large board. Employee power does not seem to affect accruals management. Lastly, in our sample, audit quality does not exhibit any statistically clear relation with the auditor's visibility (for instance, big-N or not).
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