This study tests whether firms that would benefit from import relief
(e.g., tariff increases and quota reductions) attempt to decrease earnings
through earnings management during import relief investigations by the
United States International Trade Commission (ITC). The import relief
determination made by the ITC is based on several factors that are
specified in the federal trade acts, including the profitability of the
industry. Explicit use of accounting numbers in import relief regulation
provides incentives for managers to manage earnings in order to increase
the likelihood of obtaining import relief and/or increase the amount of
relief granted