In the real world, it is hardly expected that complete contract is made because of the existence of contract costs. Thus, corporate governance has been regarded as one of major control mechanisms to affect manager’s decision-making significantly. Several prior studies related to earnings management have indicated that the higher level of corporate governance is, the lower degree of earnings management is. Obviously, it somewhat looks like straightforward. However, earnings management literatures recently suggest that mangers are shifting earnings management strategy from accrual basis to real activity basis. After the accounting reforms, it is said that change in earnings management strategy tends to be fast. It may be attributable to the reinforcement of internal control over financial reporting because strengthened internal control system can easily detect accrual-type earnings management. In addition, real activity-based earnings management has far more important meanings than accrual-based earnings management because real activity-based earnings management can induce different sorts of consequences in contrast to accrual-based earnings management. For example, real activity-based earnings management significantly affects the future cash flows of the company. On the other hand, accrual-based earnings management does not affect cash flows themselves but adjust simply the timing of recognizing revenues or expenses. Therefore, it is important to focus on the strategic changes in earnings management in that real activity-based earnings management has great impacts on the long-term prospects of the company. If so, it indeed implies that we need additional evidences on the real activity-based earnings management in order to understand the earnings management practices. In this context,this study examined empirically that how much the level of corporate governance has an effect on the real activity-based earnings management by using the evaluation score from Korean Corporate Governance Services. As a result, we could find that the degree of earnings management through real activities(such as abnormal operating cash flows, abnormal production costs, and abnormal discretionary expenses) decreased as the level of corporate governance increased. It represents that corporate governance can play an important role in controlling managers’ opportunistic behaviors on real manipulation. Additional test based on the scores of corporate governance subindices showed that they were negatively associated with real activity-based earnings management as a whole. In short, real activity-based earnings management is quite different from accrual-based earnings management in that it has direct cash flow consequences. That is, in a long-term perspective, real activity-based earnings management has unique characteristics compared to those of accrual-based manipulations. The empirical results of this paper that the level of soundness of corporate governance is strongly related to the degree of real activity-based earnings management can be an evidence to complement the existing literature on earnings management.