This paper examines evidence of Earnings Management (EM) in annual financial reports of foreign and domestic credit institutions' trading in Hungary, an ex-communist country and a Central European economy, by applying an alternative approach, the Distribution of the Ratios method. Analyses were performed with 14 banking specific ratios for the period of 1999-2015, by applying Burgstahler and Dichev ( 1997), Degeorge et al. (1991) models, Kolmogorov-Smirnov, Monte-Carlo, Benchmark and Distributional tests. Primary findings confirm that (a) the Distribution of the Ratios method demonstrates that apart from significant evidence of EM presence, managers do not always manipulate the same variables, or one area of the financial statements, but at their discretion, choose different areas to engage EM and in different periods, and (b) Credit Institutions engaged in EM in the period Prior to and After the 2008 financial crisis. Additional Benchmark Analysis results present weak evidence of EM and should be read with caution; however, Benchmark comparison should not be excluded from research.
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