This paper examines the effect of managerial ownership on real earnings management for Korean firms. More specifically, we examine the association between the magnitude of manager’s ownership and the proxies for the magnitude of real earnings management (hereafter, real EM), such as abnormal cash flow from operation, abnormal production cost, and abnormal discretionary expenses. Prior research has documented that after the Sarbanes Oxley (SOX) acts were enforced, managers began to substitute earnings management using discretional accruals (hereafter, accrual EM) by real EM. This is because regulator or auditor cannot scrutinize real EM since real EM is the results of manager’s autonomous decisions for firm’s operation. Because there is limited research examining the association between managerial ownership and real EM in Korea, we examine such an association in this study. By using 4,731 Korean firm/year observations between 2003 and 2008, we find that the magnitude of managerial ownership is negatively associated with the proxy for the magnitude of real EM while that of managerial ownership is positively associated with that of accrual EM. This study contributes to the literature by providing the first empirical evidence regarding the effect of managerial ownership on real EM for Korean firms.