This study investigates the relationship between following three kinds of real activities manipulation and earnings management with the purpose of avoiding losses. These three kinds of real activities manipulation are: (1) sales manipulation, (2) reduction of discretionary expense, and (3) overproduction. In addition to the above research, this study examines the cross-sectional features of firms in which managers use real activities manipulation to accomplish their earnings targets. There are six features specified in this study: (1) industry membership; (2) earnings management flexibility (3) stock price motivation; (4) bond covenant; (5) stakeholders motivation; (6) institutional ownership. This study applies the models of normal cash flows, discretionary expenses and production costs from Dechow, Kathari and Watts (1998) and Roychowdhury (2006) to measure the real activities manipulation, and use the pooled cross-sectional approach to detect the firm years which are suspicious for earnings management to avoid annual losses. Based on the samples of public firms in Taiwan from 1996 to 2005, the empirical results are summarized as follow: 1. Managers tend to manage earnings to avoid annual losses through sales manipulation. 2. Managers tend to manage earnings to avoid earnings decreases through reduction of discretionary expense. 3. No statistically significant relationship exists between reduction of discretionary expenses, overproduction and earnings management with the purpose of avoiding annual losses. 4. Firms with debt outstanding, high level of flexibility in earnings management tend to engage in real activities manipulation. 5. Firms with relatively high stock price motivation and reliability on stakeholders in the corresponding industry exhibit evidences of sales manipulation and overproduction. 6. Institutional ownership appears to be more short-term oriented and pressure managers to engage in real activities manipulation. 7. Industrial membership does not appear a statistically significant relationship with real activities manipulation.