... management and accounting choice literature. SeeWatts and Zimmerman (1986), Healy and Wahlen (1999) and Dechow and Skinner (2000).8statements. That is, in price protecting and demanding a higher ... “earnings discretion” (EM1 and EM2) and “earnings smoothing” (EM3 and EM4), and construct an earnings management indexfor each of the sub-categories (denoted EMdiscr and EMsmooth) as well as ... (e.g.,Stolowy and Jeny-Cazavan, 2001).7Thus, the European setting is unique insofar as it provides substantial within-country and cross-country variation in capital market and legal incentives...