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This study investigates whether distributional properties of accounting figures that are consistent to earnings management have been altered during recession period. This study is based upon the assumption that earnings management (either accrual earnings management or real earnings management) cannot be used continuously and builds upon the hypothesis that the signing of the memorandum agreement has signaled the existence of a long recession that might have altered earnings’ management behavior. Our findings show that the discontinuity of earnings around zero is not evident for firms listed in the Athens Stock exchange. Furthermore, our results suggest that the choice of auditing firm restrain earnings’ management behavior in a limited extent, that state controlled firms seem to use upward earnings management behavior, while other governance characteristics are related to accrual or real earnings management behavior.

earnings management, corporate governance, economic crisis