Abstract: Based on the data of China’s listed companies with heavy pollution, the impact of environmental regulation on accrual earnings management and real earnings management and its mechanism are studied. Environmental regulation is classified into the types of command-and-control regulation, voluntary regulation, positive incentive regulation and reverse incentive regulation, and the compound effects of different types of environmental regulation on corporate earnings management are explored. The main conclusions are as follows. First, environmental regulation promotes positive accrual earnings management and real earnings management. Second, command-and-control environmental regulation promotes negative accrual earnings management and positive real earnings management. Third, voluntary environmental regulation promotes negative accrual earnings
management and positive real earnings management. Fourth, positive incentive environmental regulation promotes negative accrual earnings management. Fifth, reverse incentive environmental regulation promotes negative accrual earnings management and real earnings management. Sixth, the compound effects of command-and-control environmental regulation and voluntary environmental regulation, command-and-control environmental regulation and reverse incentive environmental regulation, positive incentive environmental regulation and voluntary environmental regulation promote enterprises’ positive accrual earnings management. Seventh, the compound effects of command-and-control environmental regulation and reverse incentive environmental regulation, positive incentive environmental regulation and voluntary environmental regulation, positive incentive environmental regulation and reverse incentive environmental regulation promote enterprises’ positive real earnings management. Eighth, the compound effect of reverse incentive environmental regulation and voluntary environmental regulation promotes enterprises’ negative accrual earnings management and real earnings management.

Key words: environmental regulation, earnings management, command-and-control, incentive, voluntary