Although there are some researches examined the issue of income manipulations since the positive accounting theory is provided, we do not find studies that examine the relationship between income manipulations and operating risks for Taiwanese firms or studies that examine if the Taiwanese firms use non-operating items to smooth incomes. The main objective of this study is to use firm-specific actual operating data to empirically examine the relationship between earnings management and operating risks of Taiwanese firms. The empirical results show that operating risks in firms are positively associated with earning management level after controlling for effects of firm profitability, operating scale, and investment intensity.