This study examines whether consumer complaints filed with Consumer Financial Protection Bureau affect earnings management at banks in the United States. We first find a negative relationship between consumer complaints and bank earnings management. This relationship weakens in banks with the larger size, high-level liquidity, or business losses. Furthermore, a close examination indicates that the relationship between consumer complaints and bank earnings management is a U-shaped one. Specifically, banks will reduce earnings management initially at a lower-level number of consumer complaints. But, when the number of consumer complaints is recorded at a higher level, bank earnings management increases. This U-shaped impact is moderated by heterogeneity in some bank characteristics as size, liquidity, and loss. Moreover, the relationship between consumer complaints and bank earnings management depends on whether banks manipulate earnings upwards or downwards. Finally, we find the effect of consumer complaints on bank earnings management is different in commercial banks and saving banks.

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