Abstract:Using Chinese listed MNCs as the research sample and employing United Nations General Assembly voting data, analyzes and tests the effect of bilateral political relations on MNCs' real earnings management (REM). The findings indicate that favorable bilateral political relations significantly reduce the degree of REM among MNCs. Mechanism tests reveal that favorable bilateral political relations primarily curb REM by alleviating MNCs' business pressures and optimizing the information environment. Heterogeneity analysis shows that the effect of reducing REM through favorable bilateral political relations is more pronounced when the institutional environment of the host country is not good; in highly competitive industries, the overseas competitive advantages brought by favorable bilateral political relations effectively relieve market pressure, thus significantly reducing the need for REM in a highly competitive environment. Moreover, a faster internationalization process is often associated with greater development pressure, so the effect of favorable bilateral political relations in reducing REM is stronger for MNCs with a higher speed of internationalization. The findings of this study enrich the literature on the microeconomic consequences of bilateral political relations and factors influencing REM, providing important theoretical support for MNCs' rational decision-making and the promotion of high-quality economic development.