This study investigates whether managers engage in manipulating real activities to avoid small losses. I also compare the earnings management mechanisms (i.e., real activity manipulation and accrual management) by which managers use to avoid small losses across family firms and nonfamily firms. Using a sample of Taiwan’s listed firms, I provide evidence that managers manipulate real activities to avoid small losses. In addition, I find that firms use real and accrual manipulations as substitutes in managing earnings. In particular, for firms just reporting small profits, family firms use more accruals and less real earnings management; however, nonfamily firms use less accruals and more real earnings management.