Real earnings management has become an important method for listed companies’ executives to manipulate accounting earnings for its high flexibility and concealment. Under the Chinese special institutional and cultural context, exploring the CEO’s attitude towards personal interests such as fame and wealth, and the intrinsic motivation of choosing real earnings management behavior at the corporate governance level is the permanent cures of these problems. As a contract with dual governance effects, is CEO reputation an effective governance tool to improve earnings quality or a driving factor to strengthen real earnings management behavior? How to affect real earnings management?

In order to solve these problems, based on the efficient contracting hypothesis and the rent extraction hypothesis under the framework of principal-agent theory, using Chinese listed company data from 2012 to 2017, this paper combines the Western theory with China’s “face culture”, and empirically tests the double-edge effect and mechanism of CEO reputation on real earnings management behavior. The results show that: （1）There is a significant inverted U-shaped relationship between CEO reputation and real earnings management behavior, that is, there is a threshold for CEO reputation, below which CEO reputation has a positive correlation with real earnings management, and beyond which it becomes into a negative correlation.（2）CEO reputation influences CEO risk-taking through the inverted U-shaped curve effect, thus promoting the inverted U-shaped relationship between CEO reputation and real earnings management, which means that CEO risk-taking has a nonlinear mediating effect between CEO reputation and real earnings management behavior.（3）In the expanded analysis, the results show that state-owned equity, higher level of CEO equity incentive and CEO with rich career background can weaken the inverted U-shaped effect of CEO reputation on real earnings management behavior, revealing the influence of multi-level situational factors such as CEO personal characteristics and corporate factors on the relationship between CEO reputation and real earnings management. To sum up, this paper proves the dual governance effect of CEO reputation on real earnings management behavior in the Chinese context, expands the research horizon of executive implicit incentive contract, and provides theoretical reference for solving real earnings management problems and the reform of executive incentive system.