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Recently, there has been a growing tendency to start a new business. Therefore, the importance of research on the accounting behavior of startups is increasing. To live up to this trend, this study examines the relationship between startups and real earnings management. This study finds that startups are positively related to real earnings management activities compared to existing firms. This result is pronounced for firms with a need for financing. This study further finds that corporate governance mechanisms such as outside directors or foreign investors do not work which suggests that they can mitigate the relationship between startups and real earnings management. On the other hand, the present study finds that startups are not related to discretionary accruels compared to existing firms. These findings suggest that investors should pay attention to the valuation of corporate values for startups. In addition, these findings fill the void in the literature by providing new evidence on the relationship between startups and real earnings management.
